Maybe Senator Kerry should don a Santa Claus suit. He may not realize it, but he has unwittingly brought some pre-holiday cheer to Wall Street, which is rooting for a win by the pro-business Republican party in Tuesday’s midterm elections.

Although the senator has reluctantly apologized, sort of, for ridiculing the intelligence of American troops in Iraq, the furor surrounding his recent remarks — both politically and their implications for Wall Street — appears to be far from over.

Characterizing the senator’s remarks as an “extraordinarily stupid statement,” the University of Virginia’s professor of politics, Larry Sabato, says they could change the face of the election, depriving the Democrats of several House seats, perhaps control of the House itself and maybe causing them the loss of one or two Senate seats.

“There’s no question but that the Kerry controversy has hurt Democratic momentum,” he says, “and it’s even possible he could have blown the House for the Democrats.”

What triggered the political storm was Senator Kerry’s comment to college students in Los Angeles that went as follows: “In education, if you study hard and do your homework and make an effort to be smart, you can do well. And if you don’t, you get stuck in Iraq.”

The clear and biting inference was that our troops in Iraq are uneducated.

The senator, rebuked by both Republicans and Democrats for demeaning the educational level of the troops, called it all “a botched joke.”

Bowing to severe criticism, he eventually apologized after first refusing to do so, but some investment and political pros believe the political damage will linger.

One is West Coast day trader Arnold Silver. He believes the senator’s comment could be a windfall for Republicans — and Wall Street — because he thinks it might sway maybe several hundred thousand voters into the Democratic camp and away from the Republicans.

The key here, he points out, is any indication of a gain for the Republicans is a gain for the Street, a traditional Republican booster.

Mr. Sabato thinks Mr. Kerry could become “the face of defeat” for the Democrats in 2006. His statement, he went on, demonstrated why the senator lost the presidency in 2004 and why he has no chance for the nomination in 2008.

The good professor thinks there’s no question that the Republicans will put Mr. Kerry and his comment front and center in the remaining days before the election and make him the face of the Democratic party’s campaign. “The election damage that Mr. Kerry created is still an unknown, but it can’t be underestimated,” he says.

Still, Mr. Sabato thinks the Democrats will likely take the House, with “control of the Senate right on the edge of the butter knife.” To Wall Street, he says, it all adds up to some extra turmoil in government.

In 1570, in a book called “The Martyrs,” author John Fox wrote. “Don’t make a mountain out of a molehill.” The Prudential Equity Group’s chief political tracker, Charles Gabriel, thinks Wall Street would be well advised to heed those words in relating to Senator Kerry’s controversial remarks.

While he views the senator’s comments as a net positive for Republicans — enabling them for the moment to shift the headlines away from Iraq and the scandal surrounding the sexual activities of former Republican Congressman Mark Foley — he thinks the Kerry controversy is little more than an important one-day story. The entire matter, he believes, will be a fleeting memory by the time the election campaign draws to a close.

In an election update of what he’s now advising Prudential’s clients, Mr. Gabriel is sticking to his view — which he views as a 40% likelihood — that the Democrats will retake the House, but fall shy in the Senate. Rounding out the 100%, he gives the Democrats a 35% shot at winning both chambers and the Republicans a 25% chance of holding both.

Should the Democrats win both chambers, he points to five industries that are likely to suffer — namely student loan providers, HMOs, defense, drugs, and oil and gas.

If the consensus view holds true that the Democrats retake the House and the Republicans retain control of the Senate, it would result in a split government, which over the past 50 years has essentially been bullish for both the stock and bond markets.

Why so? The North American economist for Merrill Lynch, David Rosenberg, thinks this favorable result could reflect investor sentiment that a divided government leads to legislative gridlock, which means retention of the status quo in Washington. Investors, he points out, seem to be expressing the view that less government intervention is best for the economy and the markets.

Let’s say for argument’s sake the Democrats retake control of the House. If that turns out to be the case, consistent industry winners, Mr. Rosenberg notes, include defense technology, homeland security firms, alternative energy producers, stem cell research companies, and life insurance firms.

dandordan@aol.com