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Health Care Vote Critical to Coming Week

Updated from 6:00 p.m. EST

Updated to include House passage of health care reform legislation.

NEW YORK ( TheStreet) -- Investors may be suffering from health care fatigue, but the short-term direction of the stock market in the coming week was seen hinging on Sunday's vote.

The House of Representatives Sunday night passed the landmark, $940 billion health care overhaul.

Passage was secured after President Obama and House Democratic leaders worked out a last-minute deal with antiabortion Democrats who had voiced opposition to the bill. The president appeased the group by issuing an executive order offering assurances that no federal money would be used for elective abortions.

The latest version of the bill includes a handful of new taxes for investors on interest, dividends and capital gains in order to pay for the health care expansion.

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Market observers argued that with a relatively light slate of economic and earnings releases, the market would take its biggest cue from the outcome of the vote.

"If the House does vote on this, it will be a dissection of what it all means to the market," said Jay Suskind, senior vice president with Duncan-Williams. "We have the stealth capital gains taxes and what it will do to investing, the market's recent quiet rally, and health care stocks."

Robert Pavlik, chief market strategist with Banyan Partners, said that passage of the bill would likely garner a negative reaction from the market due to headlines over the capital gains tax, although he argued that wise investors should view any pullback as a short-term one that provides a good entry point.

"The health care bill and the capital gains tax news is more of the same noise that Wall Street shouldn't have to deal with," Pavlik said. "Personally, I'd be more concerned on the economy improving than an increase in capital gains. Focus on the longer-term trends, rather than the short-term Street noise."

In addition, Pavlik called the latest version of the bill "watered down," which leads him to believe that health care stocks like Aetna (AET), Cigna (CI) and Humana (HUM) won't see a big move whether the bill is passed or not.

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