Microsoft Leads as Yahoo! Delays

Proving yet again that credit crunch issues dominate, traders bought early Wednesday on rumors of an Ambac bailout, then sold the news of its plans to raise capital via a share offering, as well as a bleak Beige Book report.
Major averages ended below their early highs but managed to post decent gains, continuing Tuesday's technically driven bounce. The Nasdaq rose 0.6% to 2273, thanks to strength in big-caps Oracle, eBay and could-be dance partners Microsoft and Yahoo! (Yes, Yahoo! is my employer and "Tech Ticker's" publisher.)
Microsoft rose nearly 2%, a gain many attributed to Jefferies analyst Katherine Egbert initiating coverage with a buy rating an $33 price target.
More likely, Microsoft got a bounce because of the renewed focus on a potential Yahoo!-AOL deal, even if the odds are very low of such a combo coming to fruition. In addition, Yahoo's decision to extend the deadline for outsiders (i.e. Microsoft) to nominate a board-slate is keeping alive the idea that Yahoo has alternatives to Microsoft's bid. The slim possibility Microsoft might NOT spend $40-plus billion to buy Yahoo! has to please Redmond's shareholders, who've been in a world of hurt since the bid was announced.
Ironically – and somewhat surprisingly -- Egbert is bullish about Microsoft in part because of the Yahoo! bid, writing: "We are encouraged by Microsoft's stake-in-the-ground bid for Yahoo and believe that it, along with a more conciliatory tone towards regulators, signals a shift in strategy -- from defense to offense."

Given the action in Microsoft stock prior to today, maybe defense was the best offense.Yahoo tech ticker