Energy Seen Getting Biggest Boost From Republican Senate

Other issues that may also find traction under Republicans include a potential repeal of the medical-device tax that is part of the Affordable Care Act, which could benefit the healthcare technology sector. Medical device maker Stryker rose 0.3 percent to $87.91, roughly in line with the broader market, while Medtronic Inc added 1.3 percent to $68.87.

On the downside, casino stocks were sharply weaker. MGM Resorts sank 3.8 percent to $21.48, while Las Vegas Sands was off 2.7 percent at $58.07. Some had speculated that Republicans could try to slow adoption of online gaming, which was seen as boosting the group.

Beyond that, with Republicans controlling both houses of Congress and a Democrat in the White House, political analysts expect more of the gridlock that has characterized most of the six years of President Barack Obama's tenure.

Republicans also strengthened their grip on the U.S. House of Representatives and when the new Congress takes over in January, Republicans will be in charge of both chambers for the first time since elections in 2006.

While the Republicans don't have a large enough majority in either the House of Senate to override a filibuster or veto, it is possible an emboldened party will attempt to force budget cuts and consider another battle over the debt ceiling in 2015.

Such actions could sap market confidence, as occurred in recent such battles, most notably in 2011, when a budget fight led to the first-ever downgrade of the U.S. credit rating.

"Republicans who want to make a run for control of the executive branch in 2016 will likely strike a tone of compromise," said Jacobsen, but "those on the fringe will likely look to turn the showdown into a shutdown."

History shows a bullish bias in stocks after midterm elections. Since 1928, the S&P 500 has posted a median return of 7 percent in the 90 days after a midterm, with returns positive 86 percent of the time, according to Barclays.

(Editing by Steve Orlofsky, Toby Chopra and Alan Crosby)


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