AOL-Yahoo report, tech buying spree rallies stocks

“Technology stocks led a broad market rally Thursday as the pursuit of Yahoo heated up and chipmakers benefited from analyst upgrades,” Peter A. McKay reports for The Wall Street Journal.

“Upbeat earnings forecasts from Dow Jones Industrial Average components DuPont and Wal-Mart also helped to spur the market higher, offsetting the drag from a batch of weak retail-sales reports,” McKay reports.

“The Dow recently traded up 100.31 points, or 0.8%, at 12627.57, flirting with its first triple-digit closing gain in point terms since a feverish rally April 1,” McKay reports.

“Analysts described Thursday’s gains as a “relief rally,” the sort of short-term bounce typical after several days of doldrums, as investors look for bargains or put cash to work that they’ve kept on the sidelines. Since technology has been one of the most downtrodden sectors this year, it seems to have attracted much of the attention from such buyers so far on Thursday,” McKay reports.

“The technology-focused Nasdaq Composite Index posted stronger percentage gains than other market measures, trading up 1.6%, or 36.01 points, at 2358.13. The tech sector was buoyed by the entry of new suitors in the battle for Yahoo,” McKay reports. “Yahoo shares rose 3% after The Wall Street Journal reported that the search company and AOL are nearing a deal to merge, in a move aimed at thwarting Microsoft’s bid to acquire Yahoo. But Microsoft is recrafting its plan by talking with News Corp. about a joint bid.”

MacDailyNews Note: Shares of tech bellwether Apple Inc. (AAPL) are currently trading at $154.15, up $2.71 or 1.79%.

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“The AOL-Yahoo deal under consideration would include the repurchase of some Yahoo shares at a price above Microsoft’s offer. Taken together with a possible search advertising pact with Google Inc., the plan could give Yahoo an alternative to a Microsoft takeover — although many analysts and investors believe Microsoft will ultimately win out. At the least, Yahoo’s efforts could give it more leverage to negotiate a higher price from Microsoft,” Matthew Karnitschnig, Kevin J. Delaney, and Merissa Marr report for The Wall Street Journal.

“Under the terms being discussed between Yahoo and Time Warner, the latter would fold its AOL unit into Yahoo and make a cash investment in return for about 20% of the combined entity, people familiar with the situation said. The deal, which wouldn’t include AOL’s dial-up access business, would value AOL at about $10 billion. As part of the deal, Yahoo would use the Time Warner cash and additional funds to buy back several billion dollars worth of its own stock at a price somewhere in the middle of the range between $30 and $40 a share, the people said,” Karnitschnig, Delaney, and Marr report.

“But Microsoft is recrafting its assault plan by talking with Rupert Murdoch’s News Corp., publisher of The Wall Street Journal, about mounting a joint bid for Yahoo, people familiar with the matter said. Microsoft and News Corp. have yet to reach an agreement on joining forces but one person apprised of the plan described the discussions as serious. Such a deal would combine three of the biggest Internet properties: News Corp.’s MySpace, Microsoft’s MSN and Yahoo,” Karnitschnig, Delaney, and Marr report.

Much more in the full article here.