By Eric Johnson and Michelle Nichols
DES MOINES, Iowa/PITTSFIELD, New Hampshire (Reuters) - The rough-and-tumble Republican race for the White House became even more entangled on Wednesday when Tea Party favourite Michele Bachmann quit and Rick Perry decided to stay in after all.
Bachmann stepped down after a dismal sixth place finish in the Iowa caucuses, which were decided by a difference of only 8 votes out of the 122,000 that were cast.
Former Massachusetts Governor Mitt Romney won Iowa by the tightest of margins over social conservative Rick Santorum, a former U.S. senator who had been all but ignored until his poll numbers began to rise a week ago.
As Romney arrived in New Hampshire, where he has a solid campaign infrastructure and is heavily favoured to win the state's primary on January 10, he picked up the endorsement of Senator John McCain, who was the party's nominee in 2008.
The two former rivals appeared together a rally in Manchester where McCain made a strong speech against Democratic President Barack Obama and predicted a victory in New Hampshire would give Romney even more powerful momentum in a short time.
Despite vowing on Tuesday night to stay the course in the fight to be the Republican nominee, Bachmann finally threw in the towel. "I have decided to stand aside," said the conservative congresswoman, who pledged to support the Republican nominee, but not make an endorsement.
Throwing political pundits into confusion, Perry announced he is staying in the race for now, and would campaign in New Hampshire and South Carolina, after saying he would reassess his campaign because of a disappointing fifth-place Iowa performance.
"This is quirky place and a quirky process, to say the least. And we are going to go into places where they have actual primaries and there are going to be real Republicans voting," Perry told reporters at his hotel in Iowa.
Undecided New Hampshire voter Karen Eastman said she was not swayed by the Iowa results, which came after a dramatic night that saw Romney, Santorum and libertarian Ron Paul in a three-way race at one point.
"I think every state is different, so you really can't go by what happens (in Iowa)," said seamstress Eastman, 53. "Once they get in office a lot of them don't do what they say they're going to do. It's really hard to vote for anybody nowadays, it really is, because they don't mean what they say."
The unsettled race for the nomination to oppose Obama in November - which pollster Gallup said was the most topsy-turvy in 50 years - leaves an opening for former House of Representatives Speaker Newt Gingrich or Perry to get back to the top if Romney can't connect with more voters.
Both have southern connections - Perry is governor of Texas and Gingrich was a congressman from Georgia - and primaries in two southern states, South Carolina and Florida, are coming up on January 21 and January 31.
Perry, a steady leader in the money stakes, has $3-4 million on hand to fund a multi-state campaign, according to a knowledgeable source, and polls put him more likely than Bachmann to draw social conservatives' support from Santorum.
Gingrich can hope more strong debate performances like those that helped push him into the top tier of candidates in November. There are two more Republican debates in the next week.
"Mitt Romney obviously has a stranglehold on establishment Republicans, but if Mitt wants to wrap this nomination up he has to get beyond establishment Republicans," said Republican strategist Ford O'Connell.
GOOD NEWS FOR OBAMA
The volatility of the race may be good news for Obama, who is building a huge fundraising and vote-getting organization for the November general election. His poll numbers are improving as the high U.S. unemployment rate declines.
The lead has changed hands seven times since May, and there have been four different national frontrunners, Gallup said, making 2012 the most unsettled Republican presidential race since at least 1964.
That year, Barry Goldwater won the nomination, and suffered one of the worst general election defeats ever.
Romney and Santorum finished the Iowa contest with about 25 percent support each. Ron Paul, a Texas congressman known for his small-government views, was a close third with just over 21 percent. Gingrich came fourth, at about 13 percent.
The Iowa result boosted Romney's status as the person to beat in the nomination race, although the slim margin underscored his continuing inability to secure the trust of socially and fiscally conservative.
Known as a moderate when he was governor of heavily Democratic Massachusetts seven years ago, Romney had not been expected to do well in Iowa, where conservative Christian voters are a major influence on Republican politics.
At the end of September, Romney's campaign had 14.7 million cash on hand while Santorum's had $189,556, according to the candidates' Federal Election Commission filings.
Campaigning in all of Iowa's 99 counties, Santorum emphasized his home-schooled children and opposition to gay marriage in a bid for support from Christian conservatives. That strategy of staking his campaign on a strong showing in Iowa paid off, but with little cash and a bare-bones campaign operation he could have difficulty competing in other states.
A Suffolk University poll showed Romney at 43 percent support in New Hampshire, to 14 percent for Paul and 9 percent for former Utah Governor Jon Huntsman, who has based his campaign in the small New England State.
Gingrich was at just 7 percent and Santorum at 6 percent.
"There is a very unsettled Republican electorate... Essentially you got 75 percent of the party, at least as stated by Iowa, that are still looking for an alternative and I say that means there's a whole lot of blue sky for the rest of us in the race and this is anything but settled as this point," Huntsman said.
(Additional reporting by David Morgan, Susan Heavey and Patricia Zengerle in Washington, Scott Malone in New Hampshire, Jane Sutton and Steve Holland in Iowa and Karen Brooks in Texas, Writing by Patricia Zengerle, Editing by Alistair Bell and Christopher Wilson)
