WRAPUP 4-U.S. Republicans Capture House, gain in Senate

* Legislative gridlock looms

* Economy, discontent with Obama propel Republicans

* Republicans gain 10 in governors races

By John Whitesides

WASHINGTON (Reuters) - U.S. President Barack Obama faced a bleak political landscape on Wednesday after voters punished Democrats over high unemployment and a sluggish economic recovery, delivering a divided Congress in Tuesday's midterm elections.

Republicans pushed Democrats decisively from power in the House and strengthened their ranks in the Senate, a result that could herald legislative gridlock when the new Congress takes power in January.

Republican control of the House will weaken Obama in fights over the extension of income tax cuts set to expire at the end of the year and over efforts to pass comprehensive energy or immigration bills.

"The ability of this administration to get major new programs done was already limited. This just seals the deal," said Jaret Seiberg, policy analyst with the investment advisory firm Washington Research Group.

Television networks projected Republicans would pick up at least 60 House seats, more than the 39 they needed for a majority that would elevate conservative John Boehner to House speaker, put Republicans in charge of House committees and slam the brakes on Obama's agenda.

The Republican wins surpassed their sweep in 1994, when President Bill Clinton's Democrats lost 54 House seats, and was the biggest shift in power since Democrats lost 75 House seats in 1948.

"DO THINGS DIFFERENTLY"

Republicans have portrayed Obama and his Democrats as big spenders who have recklessly run up massive deficits. The charge seemed to resonate with voters.

"Our new majority will be prepared to do things differently," Boehner told supporters late on Tuesday.

"It starts with cutting spending instead of increasing it, reducing the size of government instead of increasing it and reforming the way Congress works."

Obama made a late-night call to congratulate Boehner and discuss ways they could work together to create jobs and improve the economy, a Boehner aide said.

The president is due to hold a news conference at 1 p.m. EDT (1700 GMT) on Wednesday to talk about the post-election landscape.

Dick Durbin, the No. 2 Senate Democrat, said no significant legislation would pass without input from Republicans.

"We need to move beyond filibusters and enter a real conversation about passing legislation that this country needs," he told Reuters.

Republican candidates had pushed an agenda of spending cuts and at least a partial repeal of Obama's healthcare and Wall Street reforms, but Obama could veto their efforts.

Stocks in health insurers like UnitedHealth Group Inc, WellPoint Inc and Aetna Inc are likely to rise on the Republican gains, analysts said, even if a full repeal of healthcare reform is unlikely.

Similarly, Obama's veto and Democratic Senate power will likely block attempts by Republicans to roll back the landmark Dodd-Frank Wall Street reform law.

One big item from Obama's agenda when he took office in January 2009 is likely to remain unticked.

"These elections are a death knell for any sort of environmental bill in the short or medium term, however they say very little -- if nothing -- about Obama's electoral prospects," Ipsos Pollster Cliff Young said, referring to the president's chances for re-election in 2012.

REID LIVES ON

Senate Democratic leader Harry Reid won the country's most high-profile Senate race after a brutal battle with Tea Party favorite Sharron Angle in Nevada. He said he was determined to renew the struggle to create jobs and bolster the economy.

"The bell that just rang isn't the end of the fight. It's the start of the next round," Reid told jubilant supporters in Nevada.

Democrats also won key Senate races in West Virginia and California, where Senator Barbara Boxer won re-election, ensuring they would retain at least a slender Senate majority.

Senate Republicans gained six seats and the re-election bids of two other Democratic incumbents -- Michael Bennet in Colorado and Patty Murray in Washington -- were too close to call.

U.S. stock futures pulled back from earlier gains as Republican chances of a Senate takeover waned. With opinion polls favoring Republicans, markets had factored in Republicans winning the House and Democrats holding the Senate.

Investors said the outcome of Wednesday's U.S. Federal Reserve meeting was of greater market importance. The Fed is expected to announce it will pump billions of dollars into the economy to speed the recovery.

All 435 House seats, 37 of the 100 Senate seats and 37 of the 50 state governorships were at stake in Tuesday's voting.

Exit polls found voters deeply worried about the economy, with eight in 10 saying it was a chief concern. Four of every 10 voters said they supported the conservative Tea Party movement and nearly three-quarters believed government did not function properly.

The Republican rout extended from coast to coast and knocked at least 30 Democratic incumbents out of the House, including veterans Ike Skelton, chairman of the Armed Services Committee, and John Spratt, chairman of the Budget Committee.

In the Senate, Republicans picked up Democratic seats in Indiana, Wisconsin, North Dakota, Pennsylvania and Arkansas as well as Obama's former seat in Illinois.

The three-way race for the Republican-held Alaska Senate seat was too close to call with incumbent Lisa Murkowski running as an independent write-in candidate against Tea Party favorite Joe Miller and Democratic challenger Scott McAdams.

TEA PARTY RISES

Florida Republican Marco Rubio and Kentucky Republican Rand Paul became the first Tea Party-backed candidates to win Senate seats, ensuring an influx of conservative views in the staid chamber. Another Tea Party favorite, Republican Christine O'Donnell in Delaware, lost her race.

Grass-roots anger over government spending and economic weakness gave rise to the Tea Party, a loosely organized movement that backed a message of smaller government and lower taxes.

Republicans picked up at least 10 governorships from Democrats, including the battleground state of Ohio, and held the office in Texas in a race with vital implications for the once-a-decade redrawing of congressional districts that begins next year.

Democrat Jerry Brown won in California in the race to succeed Republican Governor Arnold Schwarzenegger. (Additional reporting by Thomas Ferraro in Washington, Caroline Valetkevitch, Nick Zieminski and Rodrigo Campos in New York and John Rondy in Milwaukee; Editing by Frances Kerry and John O'Callaghan)