Wall Street wobbly post-election

NEW YORK (CNNMoney.com) -- Stocks were choppy Wednesday afternoon as investors weighed the possibility of a Democratic-controlled Congress and what it might mean for Big Business.

The Dow Jones industrial average (down 37.78 to 12,118.99, Charts) fell about 0.2 percent about three hours into the session, after hitting a record trading high in an Election Day rally on Tuesday.

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The broader S&P 500 (down 1.06 to 1,381.78, Charts) index and the tech-fueled Nasdaq composite (up 0.66 to 2,376.54, Charts) both hovered near unchanged.

All three major gauges had been weaker at the open and in the early morning, before improving heading into midday.

Surprise news Wednesday afternoon that Defense Secretary Donald Rumsfeld was resigning had little effect on the market.

Stocks rallied Monday and Tuesday as investors geared up for Tuesday's Congressional elections, with many on Wall Street expecting the Democrats to take control of the House of Representatives, but for the Republicans to hold on to the Senate by a slim majority.

Such a scenario may still prove to be the case. However, it was unclear as of Wednesday morning.

While preliminary tallies show that the Democratic Party has taken control of the House for the first time since 1994, control of the Senate remains too close to call, due to undecided races in Virginia and Montana.

Regardless of the outcome, the impact is more likely to be felt by individual stock sectors rather than the broader market, analysts said.

"I think the market had basically factored in that there was going to be a change in the political landscape," said Ted Weisberg, a New York Stock Exchange floor trader at Seaport Securities.

"Whether you have the Democrats controlling the House or controlling both houses, you still have a Republican leader in the White House and that still means gridlock," he added.

Gridlock would limit the power of either party to push through legislation perceived as partisan, an environment acceptable to the markets.

Beyond the election, stocks are likely to continue the recent advance, with the positives that have boosted the market for months remaining in place. They include: strong earnings, the belief that the economy is headed for a so-called "soft landing" and supportive Federal Reserve policy regarding interest rates.

Among decliners, pharmaceutical and defense stocks were under pressure, reflecting the possibility of a Democratic congress.

Dow losers included Pfizer (down $0.57 to $26.48, Charts), down 1 percent and Merck (down $1.66 to $44.24, Charts), down 3.5 percent. Merck was also under pressure on news that it is facing $5.6 billion in tax liabilities related to accounting for past transactions.

Defense stocks slid on bets that a Democratic congress would cut spending. Dow stock Boeing (down $0.32 to $84.23, Charts) fell, along with competitors Lockheed Martin (down $1.37 to $86.12, Charts), Northrop Grumman (down $0.80 to $65.60, Charts) and Raytheon (down $0.89 to $48.79, Charts).

Stem cell research companies rose on bets about the new Congress, including news that Missouri voters approved a measure guaranteeing federally-supported research and treatment in the state. Shares of StemCells (up $0.32 to $3.39, Charts) and Geron (up $0.31 to $8.69, Charts) both climbed.

Oil stocks rose along with the price of the raw commodity, giving the market some strength. The Amex Oil (up 11.57 to 1,162.04, Charts) index added 0.8 percent.

Among other stock movers, Hospira (down $4.42 to $33.38, Charts) slumped 11.7 percent in unusually active trading after the maker of specialty pharmaceuticals reported quarterly earnings that fell from a year ago and missed forecasts by a penny-a-share.

U.S. light crude oil for December delivery rose $1.17 cents to $60.10 a barrel on the New York Mercantile Exchange after the weekly inventory report showed a smaller-than-expected rise in crude supplies.

Treasury prices rose modestly, lowering the yield on the 10-year note to 4.65 percent from 4.66 percent late Monday. Bond prices and yields move in opposite directions.

COMEX gold fell $3 to $624.70 an ounce.

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