(For a Reuters live blog on U.S., UK and European stock

markets, click or type LIVE/ in a news window.)

*

All three major indexes hit record highs

*

Trump-linked stocks, Tesla jump

*

Market volatility gauge falls sharply

*

Shares of small-cap companies soar

*

Indexes up: Dow 3.19%, S&P 500 2.1%, Nasdaq 2.37%

(Updated at 12 p.m. ET)

By Lisa Pauline Mattackal and Ankika Biswas

Nov 6 (Reuters) - Wall Street's main indexes soared to

record highs on Wednesday, as Republican Donald Trump won the

2024 U.S. presidential election in a remarkable comeback four

years after he was voted out of the White House.

Wall Street is anticipating lower taxes, deregulation and a

U.S. president who is quick to sound off on everything from the

stock market to the dollar, even though tariff hikes could bring

challenges in the form of higher deficit and inflation.

The Republican's win powered a rally in Trump trades, as

U.S. Treasury yields surged, bitcoin hit a record high

and the dollar gained.

"The market response suggests that (a Trump victory) wasn't

fully priced in, what we're seeing is an extension of the Trump

trade that basically assumes a red sweep scenario where both the

House and the Senate are controlled by the Republicans," said

Candice Bangsund, portfolio manager, Private Markets Solutions

at Fiera Capital.

The small-cap Russell 2000 jumped 4.7% to a near

three-year high, as domestic-focused stocks expect to benefit

from an easier regulatory and tax regime, as well as be less

exposed to likely import tariffs.

"The next 6-12 month outlook for small caps to have a catch

up trade is absolutely intact," said Sean Gallagher, global head

of Lazard's Small Cap Equity Platform.

The VIX, a measure of market volatility, dropped

nearly 5 points to its lowest since September.

The Dow Jones Industrial Average rose 1,345 points,

or 3.19%, to 43,566.98. The S&P 500 rose 120.78 points,

or 2.1%, to 5,903.45, while the Nasdaq Composite rose

436.48 points, or 2.37%, to 18,875.65.

Most of the S&P 500's sectors were trading higher.

Financials led the gains with a 5.5% surge to hit a

record high, while the KBW bank index was set for its best

day in four years.

The Energy, Industrials and Consumer

Discretionary sectors were up around 3% each.

However, rate sensitive real estate and Utilities

slipped as investors assessed the chances of Trump's

policies boosting inflation and dampening the rate-cut outlook,

which has been a key driver of Wall Street's recent rally.

The central bank is widely expected to ease benchmark

interest rate by 25 basis points on Thursday. But, traders have

begun to trim bets on the cuts expected next year.

"That sharp (move) up in Treasury yields has the potential

to weigh on stock market valuations," Bangsund said.

Stocks that are expected to perform well under a second

Trump term posted strong gains, with Trump Media & Technology

Group ( DJT ) up 9.3%. Tesla leapt 14% as CEO Elon Musk

has supported Trump in his electoral campaign.

Strong gains were also seen in shares of cryptocurrency

companies, energy firms and prison operators, while renewable

energy shares fell.

Market focus turned to whether the Republican party could

maintain a majority in the House of Representatives after

gaining control of the U.S. Senate.