American stocks rallied as President Bush defeated Senator Kerry, spurring gains among drugmakers, oil companies, and dividend-paying shares.

The Standard & Poor’s 500 Index climbed to a four-month high.

“This is a clear indication that the market is much happier with Bush being re-elected than with Kerry moving to the White House,” said Joseph Keating, who oversees $25 billion as chief investment officer at AmSouth Bancorp in Birmingham, Ala. “The outlook for the economy is better if we’re not looking at the potential for tax increases than if Kerry were elected.”

Pfizer Inc. led advances among drug makers. Mr. Kerry had pledged to expand the production of generic drugs, along with pursuing alternative energy sources and reversing Mr. Bush’s cut in the tax rate on dividends.

The Standard & Poor’s 500 Index added 12.66, or 1.1%, to 1,143.20, a level not seen since June 23. The benchmark gained for a seventh day, its longest streak since September 2003.

The Dow Jones industrial average rose 101.32, or 1%, to 10,137.05, rebounding from a drop Tuesday that was fueled by speculation Mr. Kerry was leading in some battleground states. The Nasdaq Composite Index climbed 19.54, or 1%, to 2,004.33, its highest since July 2.

More than three stocks advanced for every one that declined on the New York Stock Exchange. Some 1.77 billion shares changed hands on the Big Board, marking the busiest trading since June 25 and a 30% increase from the three-month average. Cheers erupted on the floor of the NYSE shortly after 11 a.m., when Mr. Kerry called Mr. Bush to concede defeat.

“The election has had people on the sidelines,” said Walter Todd, who helps manage $1 billion at Greenwood Capital Associates in Greenwood, S.C. Investors “can now focus on the economy and earnings, which have been strong.”

Investors credit Bush policies for helping the economy expand 3.9% in the 12 months that ended in September. Profit at S &P 500 companies will rise an average of 10.6% next year, said Thomson Financial.

Yesterday’s gain broke the S &P 500’s pattern of lower highs since February 11, when the benchmark reached this year’s peak. The index failed to surpass its previous high three times – in April, June, and October.

Its rally yesterday is also the third biggest on the day following a presidential election since World War II. The S &P 500 rose 1.8% when Ronald Reagan won in 1980,and increased 1.5% after Bill Clinton was re-elected in 1996.

The benchmark climbed as much as 1.5% yesterday before a jump in oil prices caused the rally to fade. Oil for December delivery closed up 2.5% at $50.88 a barrel in New York.

Pharmaceutical stocks as a group accounted for more than a fifth of the S &P 500’s gain. Pfizer, the no. 1 drugmaker, added 75 cents to $29.45. Rival Merck & Co. advanced $1.07 to $27.87.

Health care “will be one of those sectors that does well through year-end,” said Bob Sitko, who helps manage $400 million at USAA Private Investment Management in San Antonio. “Kerry would’ve taken more draconian steps towards price controls in one form or another.”

Since 1970, pharmaceutical and health-care companies have outperformed the S &P 500 in the three months after a Republican presidential victory, according to Credit Suisse First Boston. Pharmaceutical stocks gained an average of 3.4%, while health-care shares jumped 3.2% on average, CSFB said.

Companies that develop treatments based on using stem cells slumped as Mr. Bush has limited such research. StemCells Inc. shed 97 cents to $3.14. Geron Corp. lost 98 cents to $6.95.

Oil drillers and oil-field service companies climbed. Transocean Inc., the no. 1 offshore oil driller, jumped $1.74 to $35.85. Noble Corp., a driller which yesterday said it will start paying a quarterly dividend, gained $1.90 to $45.57.

Mr. Bush proposed allowing oil drilling in Alaska’s Arctic National Wildlife Refuge, while Mr. Kerry favored alternative energy resources and tightening environmental regulations.

Ballard Power Systems Inc., the largest supplier of automotive fuel, fell $1.42 to $8.78. FuelCell Energy Inc., which sells nonpolluting electricity-generation equipment, sank $1.21 to $11.80.

Halliburton, the world’s largest oilfield-services company, jumped $1.54 to $37.08.The Federal Bureau of Investigation is probing whether the company, which Vice President Cheney headed from 1995 to 2000, was given preferential treatment to win contracts in Iraq.

The Dow Jones Select Dividend Index, a measure of 50 stocks that provide above-average payouts, climbed 1.8%. Mr. Kerry had pledged to roll back Mr. Bush’s dividend-tax cut. Mr. Bush last year lowered the rate to 15% from as much as 38.6%.

Altria Group Inc., which pays a dividend equal to 5.9% of its share price, added $1.43 to $50. Comerica Inc., which has a 3.4% dividend yield, rose 95 cents to $60.70.

In the 13 presidential election years since 1952, the S &P 500 gained an average of 6% in the last two months of the year, according to UBS AG. An advance of that magnitude would push the S &P 500 to 1,198, based on its closing price on October 29, and above its 2004 high. The benchmark has remained within a 95-point range this year, the narrowest difference between peak and trough since 1994.

“There has been an awful lot of money piling up on the sidelines and that money will make its way into the market now,” said AmSouth’s Mr. Keating, who expects the S &P 500 to climb 5% to 10% for the remainder of the year.

Senate Democratic Leader Tom Daschle’s defeat raised optimism that the prospects for the creation of a fund to end lawsuits of asbestos-related injuries would improve. W.R. Grace added $1.51 to $12.10. USG Corp. surged $5.81 to $28.

Defense contractors gained on optimism a Republican-led government will sustain spending in military equipment. Raytheon Co. added 79 cents to $37.55. Lockheed Martin Corp. advanced $1.78 to $55.89.

Shares of Fannie Mae and Freddie Mac declined amid concern the Bush administration will impose a tougher regulator for the government-sponsored mortgage finance companies. Fannie Mae slumped $2.67 to $68.77, while Freddie Mac slid $1.25 to $65.99.