Scenario: Republican win in Massachusetts may favor Wall St.

NEW YORK (Reuters) - U.S. stocks are likely to rally if Republicans pull off a victory in Massachusetts' Senate election on Tuesday, on hopes that it would slow down President Obama's sweeping reform program, especially with respect to healthcare.

The Democrats' big majorities in Congress are considered key to passing President Obama's reform agenda across numerous parts of the economy, including banking and healthcare.

The latest opinion polls suggest Republican candidate Scott Brown will defeat state Attorney General Martha Coakley, which would be a huge upset in this traditionally liberal New England state, and take away the Democrats' super-majority in Congress.

Here are some possible scenarios of market reaction to election results.

* Republican candidate Brown wins, Democrat Coakley loses

Stocks would rise as the victory gives the Republicans 41 seats in the Senate, enough to filibuster President Obama's reform bills, including healthcare. Democrats would lose their 60-vote Senate super-majority that now lets them clear Republican procedural hurdles and pass legislation or confirm presidential nominees without a single Republican vote.

"The hope is (for) a return of gridlock, traditionally very favorable for equity markets," said Carmine Grigoli, chief U.S. investment strategist, equity division, at Mizuho Securities USA in New York.

If Democrats are stripped of such a majority, Obama would be forced to try to find common ground with Republicans, who have opposed most of his agenda, including the landmark bid to revamp the $2.5 trillion U.S. healthcare system.

Goldman Sachs noted healthcare stocks are likely to rally, with managed-care stocks such as Humana Inc expected to gain the most, followed by pharmaceuticals.

Humana rose 7.1 percent on Tuesday to close at $51.94.

Pharmaceutical companies' shares also advanced, with Merck & Co and Pfizer Inc rising as the Dow's top two percentage gainers.

In contrast, hospital stocks such as Community Health Systems Inc and Tenet Healthcare Corp came under pressure, as they have been viewed as "net winners" under the reform.

The S&P Healthcare Index ended up 2.04 percent as last-minute voters rushed to the polls to determine who will replace the late Edward Kennedy in a close race.

Financial stocks would also gain as a Republican victory could slam the brakes on Obama's legislation to tighten regulations of the U.S. financial industry. In Massachusetts, Coakley has demonstrated a position of wanting to regulate the sector.

"Financials will have more resistance to regulations," said Matt Havens, partner at Global Vision Advisors in Hingham, Massachusetts.

The Republican win would also be positive for the U.S. dollar in the long run as a more divided Congress generally produces diverse policies.

It may fuel the dollar's slow shift from being a risk play -- the dollar reacts as a safe haven -- to a fundamental play, market analysts said.

Voting started at 7 a.m. EST (1200 GMT) and polls will stay open until 8 p.m. EST (0100 GMT on Wednesday). Results could take a few hours to emerge after the polls close.

Democratic leaders are pushing to win final approval of a sweeping healthcare bill so Obama can sign it into law before a possibly victorious Brown is sworn in as a senator and is positioned to help fellow Republicans kill the measure.

It could take at least a couple of weeks for Massachusetts to certify the winner. Democrats may seek to delay the certification, while Republicans would likely push to accelerate it.

* Democrat Coakley wins, Republican candidate Brown loses

While a Democratic victory could lead to a slight pullback in the healthcare stocks that sent major indexes up more than 1 percent on Tuesday, it is a scenario that has already been discounted in the market for the past few days, analysts said.

What looked likely to be a Democratic shoo-in to replace the late Democratic Party icon Edward Kennedy turned into a too-close-to-call race with a last-minute rally by Brown. The Republican win was an outcome thought to be unfathomable only weeks ago.

"I don't think it represents that much of a change at all from the Street's standpoint. A very neutral outcome (is expected) from the market in general, and healthcare in particular," said Craig Peckham, equity trading strategist at Jefferies & Company in New York.

Nevertheless, the victory would still pose a hurdle for the Obama administration.

"Even if he (Brown) loses by a small margin, it will still send a strong enough message that people are not happy with Washington's spending ... it's kind of a win-win situation for the market," said Peter Cardillo, chief market economist at Avalon Partners in New York.

More broadly, an upset in Massachusetts, or even a narrow win for Coakley, would raise the specter of large losses for Democrats in midterm congressional elections in November.

(Reporting by Angela Mood; Additional Reporting by Rodrigo Campos, Leah Schnurr, Chuck Mikolajczak and Vivianne Rodrigues; Editing by Jan Paschal)