Searching for a tech rally

NEW YORK (CNNMoney.com) -- Some positive developments for tech leaders Yahoo and Sun Microsystems could send the Nasdaq solidly higher at Wednesday's open, with smaller gains for the broader market.

At 7:51 a.m. ET, Nasdaq futures were up quite a bit, while S&P futures were up more modestly.

Oil gave back some of Tuesday's big gain. U.S. light crude eased 56 cents to $54.48 a barrel in electronic trading, ahead of the weekly report on U.S. fuel inventories due at 10:30 a.m. ET.

During his State of the Union speech Tuesday, President Bush called on replacing 20 percent of the nation's gasoline use with renewable fuels such as ethanol in the next 10 years.

Treasury prices were narrowly higher, trimming the 10-year note yield to 4.80 percent from 4.81 percent late Tuesday.

Yahoo (Charts) saw its shares sink immediately after reporting results and tepid guiance right after the bell Tuesday. But shares then rebounded to gain about 6 percent when CEO Terry Semel reassured Wall Street that the company's new search tool would help boost Yahoo's sales later in the year.

Sun Microsystems (Charts) bucked forecasts of continued losses to post a profit in the just completed quarter, and lifting its shares more than 8 percent in after-hours trading.

But it wasn't all good news for tech stocks. Chipmaker Advance Micro Devices (Charts) lost 4 percent in after-hours trading after reporting a earnings excluding items that were well below forecasts.

And another chipmaker, Broadcom (Charts), announced after the bell said has restated its results to take charges of $2.22 billion from 1998 to 2005 due mostly to misdated stock option grants. Shares lost nearly 1 percent on the news.

Still the news from Yahoo and Sun were enough to set a positive tone for technology, said Peter Cardillo, chief market economist for Avalon Partners, although not enough to spur stocks towards a major gain.

"There was obviously some good news out of tech overnight," he said. "I think this market is probably headed in a trading range over the next several weeks as earnings reports come in."

There was also a number of reports about mergers and acquisitions for investors to weigh Wednesday.

Kitchenware and home decor retailer Williams-Sonoma (Charts) denied Tuesday it has hired Goldman Sachs or any other investment bank to explore strategic options. Shares gained 3 percent in after-hours trading.

News Corp. (Charts) has joined the Chandler family in its bid for the Tribune Company (Charts), according to a report Tuesday. Shares of Tribune, which has had trouble finding buyers to offer a premium for the company, edged 0.2 percent higher in after-hours trading.

Bankrupt Delta Air Lines (Charts) is not in merger talks with rival Northwest Airlines (Charts), which is also in bankruptcy, Delta CEO Gerald Grinstein said in a newsletter to employees Tuesday. Delta is trying to hold off a hostile $9.8 billion takeover bid from rival US Airways (Charts). US Air shares edged higher on the report.

The future of airline consolidation will be the subject of a Senate hearing Wednesday morning.

And the Wall Street Journal reported that the investment arms of long-time Wall Street rivals Goldman Sachs (Charts) and Morgan Stanley (Charts) could be joining in a group of private equity firms to make a bid of as much as $15 billion for the oil and natural gas assets of Dominion Resources (Charts).

Stocks in Asia closed mostly higher as Japan's Nikkei ended at a nine-month high. Stocks in Europe were also stronger in the early going. The dollar was stronger against the euro but weaker against the yen in early trading.

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