Nancy Pelosi spearheaded the Democratic takeover of the U.S. House of Representatives Tuesday, positioning herself to become the first woman to lead the chamber — and President Bush’s worst political nightmare.

Democrats rolled up gains of about 30 seats in the House in Tuesday’s elections, riding to a huge victory on a wave of public discontent with the Iraq war, corruption and Republican President George W. Bush’s leadership.

With control of the U.S. Senate yet to be decided, investors could decide to sell stocks following a strong run-up in anticipation of gridlock in Congress rather than the wider sweep garnered by the Democrats.

“Not only is the market going to be taken by surprise on the outcome, but the uncertainty about the Senate race could create even more volatility,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

S&P 500 futures were down 6.8 points, below fair value. Dow Jones industrial average futures dropped 42 points and Nasdaq 100 futures fell 8.75 points. Analysts said sectors likely to be under pressure from a Democratic sweep included defense, tobacco and pharmaceuticals.

In a setback to Bush and Republicans, Democrats picked up four of the six Senate seats they needed for a majority and led in races for the other two, in Montana and Virginia, threatening to take control of both chambers of Congress for the first time in 12 years.

A potential recount and possible legal challenges in Virginia could delay the final result, dredging up memories of the 2000 presidential election recount that lasted five weeks.

Democrats also scored big wins in governors’ races, taking six seats from Republicans and winning a national majority that could give them an edge in the 2008 presidential election. California Gov. “Terminator” Arnold Schwarzenegger rolled to easy re-election.

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