Tea Party's Rise Bears Watching

Wall Street saw a modest gain in the wake of the latest round of primaries, but it will be interesting to see how loudly Tuesday's voting reverberates come the elections in November.
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NEW YORK (

TheStreet

) -- Wall Street saw a

modest gain

in the wake of the latest round of primaries, but it will be interesting to see how loudly Tuesday's voting reverberates come the actual elections in November.

The

palpable progress

made by the Tea Party offshoot of the Republican Party, most notably the win of the GOP slot on the ticket for U.S. Senate in Delaware by Christine O'Donnell over political veteran Mike Castle, will force party leadership to make tough choices about where and how it deploys its resources.

For instance, Castle was reportedly viewed as a very solid candidate to snag the Delaware Senate seat vacated by Vice President Joe Biden, so he would have likely gotten generous support from the party, which is looking to unseat the Democratic majority in the Senate.

O'Donnell, on the other hand, is far from a favorite with GOP higher-ups, who have made it clear they don't view her as a viable candidate -- despite the endorsement of former Alaska Gov.r Sarah Palin -- so it's difficult to see her getting the same support. Karl Rove, a strategist for the Republicans, said as much in an interview on

Fox News

last night.

"I'm for the Republican, but I got to tell you, we were looking at eight to nine seats in the Senate," Rove said in the

interview with Sean Hannity

. "We are now looking at seven to eight in my opinion. This is not a race we're going to be able to win."

If Rove's right in his contention that the degree of difficulty for winning the seats required for a Republican majority just went up, then Wall Street could be looking at continued Democratic dominance from a legislative standpoint. That doesn't mean everything President Obama proposes will go through, of course, but it does increase the chances.

Through Wednesday's positive close, the Dow was up 1.4% so far in 2010, having just managed to claw back into positive territory for the year late last week. The market's summer swoon was largely the result of growing investor nervousness about the pace of economic recovery, and renewed fears of a double-dip recession were swirling right up until September's plus 5% rally began.

But job creation is going to have to kick in at some point for the market to make a meaningful move higher, and the Democrats retaining a majority in the Senate will obviously give them a better chance of pushing their agenda through Congress. That could ultimately be viewed as a positive on Wall Street, just in terms of getting something done.

There are still too many moving parts involved to expect much of a reaction from the markets at this point, but the rising potential for Tea Party candidates to give the Democrats an edge by disrupting traditional Republican support should be watched closely by investors trying to read the tea leaves for the rest of the year.

--

Written by Michael Baron in New York.

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