It wasn't those planes that killed Kong... It was beauty that killed the beast.

The rally from the mid-March lows came to a screeching halt this week amid surging oil prices and renewed concern about financials after pitiful results this week from Fannie Mae, AIG, Legg Mason and others.

Those hurt but what really killed the market's momentum was overconfidence.

Last weekend the market chatter was all about the stock market's "breakout," which appears to have peaked, at least for the near-term, when the S&P 500 hit 1422 intraday on May 2. Traders everywhere seemed to be getting bullish and even veteran market watcher Richard Russell was uncharacteristically upbeat in Barron's last weekend, fueling talk of how "Dow Theory" was signaling a new bull phase. (Dow Theory is based on the relationship between the Dow Industrials and Transports, which are likely to be under additional pressure Monday after FedEx's warning late Friday.)

This week brought a lot of chatter from Wall Street titans, including Hank Paulson and Jamie Dimon, about the credit crisis being over, or in its final throes.

Too much optimism can be a dangerous thing because if everyone is bullish that probably means they've placed bets accordingly - and short sellers have already covered positions -- leaving the market more vulnerable to a decline.

On that note, kudos to Jeff Saut of Raymond James who warned about the "overbought" state of the market generally, and financials specifically, in an interview Monday on Tech Ticker.

Kudos as well to Helene Meisler, who correctly predicted more short-term upside but trouble in early May during her Tech Ticker appearance on April 21.

Meisler, a technician who writes TheStreet.com's Top Stocks newsletter, has been writing about other unconventional explanations for the market's recent moves. Specifically, the stock market's relationship to bond yields -- which fell significantly this week after hitting their highest levels since February on Monday -- and the yen's strength vs. the dollar.

Crude's remarkable run resumed Friday as "black gold" surged above $126 per barrel at its intraday peak. Not coincidentally, crude's rise has been accompanied by a falling dollar, which saw its recent rally halted this week by some tough anti-inflation rhetoric from European central bankers.

Specifically, European Central Bank chief Jean-Claude Trichet warned that Europe may be in for a "rather protracted period of high inflation."

The ECB, which left rates unchanged at its policy meeting this week, has always been more focused on fighting inflation than the Fed, which has a dual mandate of price stability and full employment.

Partially as a result, Ben Bernanke now finds himself in the bind of having to fight the inflationary ramifications of his aggressive moves to ease the credit crunch. The big problem is that the crisis itself shows little signs of abating, as AIG's results demonstrate, and the U.S. economy/consumer can ill afford a more hawkish Fed.

In other words, the Fed may continue to talk tough about inflation, but don't expect them to take any action anytime soon.

The stock market is taking it on the chin Friday as AIG's gaping loss has put the financial sector back in a harsh spotlight. But beneath the gloomy surface some tech stocks are shining, most notably Priceline.com and Activision.

Priceline.com reported first-quarter earnings of 76 cents per share vs. the consensus estimate of 60 cents. The company said it expects full-year 2008 EPS of $5.25 to $5.65 per share vs. the analysts' consensus of $5.12.

Priceline shares are soaring Friday as the online travel firm continues its long comeback from the depths of the post-2000 tech bust.

Separately, Activision reported fiscal fourth-quarter earnings of 14 cents per share vs. the consensus forecast of just 5 cents as its "Guitar Hero" and "Call of Duty" franchises continued to perform well.

Cowen & Co. and Kaufman Brothers upgraded Activision in the wake of their results, and the shares were responding accordingly.

Take-Two shares, meanwhile, have barely budged this week despite huge first-week sales for Grand Theft Auto IV, suggesting Electronic Arts may not need to raise its bid after all.

Is Microsoft giving Yahoo a face-saving way to come back to the negotiating table? That's one interpretation of Microsoft's latest statements and decision to dismantle is proxy board slate. It's also a plausible explanation for why Yahoo shares have been so surprisingly strong this week.

Overnight, Bill Gates reiterated his prior comments about how Microsoft is now " focused on its independent strategy," but he didn't totally rule out a deal. Neither did chief strategy officer Craig Mundie, whose comments yesterday included plenty of wiggle room, as Henry Blodget writes.

"Yahoo could always come back again and say please buy us for $33 (a share) and I'm sure we might reconsider it, but we're not assuming that's going to happen," Mundie said.

The bottom line is the ball is in Yahoo's court, as Henry and I discussed earlier this week -- and Microsoft is signaling it would be receptive to negotiations.

Also, Microsoft's decision to release members of the proxy board slate from their obligations could be viewed as a sign the company isn't planning a hostile offering -- not that it's totally ruled out doing a deal (period).

Meanwhile, Sergey Brin made some effusive comments about Yahoo yesterday, saying Google remains open to doing an outsourcing deal, refuting rumors to the contrary. On another level, Brin is helping Tech Ticker's parent maintain some leverage on the chance Yahoo chooses to revive negotiations with Google's archenemy, Microsoft.

Wall Street titans keep saying the credit crisis is ending, but the headlines from financial firms say otherwise.

Thursday evening, AIG became the latest firm to produce shockingly bad results, posting a first-quarter loss of $7.81 billion and saying it will seek to raise $12.5 billion to shore up its balance sheet.

"While we anticipated a difficult trading environment, the severity of the unrealized valuation losses and decline in value of our investments were beyond our expectations," AIG CEO Martin Sullivan said in a statement.

Meanwhile, Citigroup announced plans to sell $400 billion of "non-core" assets at its analyst meeting this morning.

AIG's Sullivan and Citi's CEO Vikram Pandit are relatively new in their jobs and appear to be following the classic script: Take big losses early in your tenure, blame the prior regime, and set yourself up to look like a hero if/when the cycle turns.

The playbook also calls for slashing jobs, which is part of Wall Street's normal "boom-bust" cycle. The problem is the financial services industry has become a much bigger part of the U.S. economy in recent decades, meaning what's bad for Wall Street is also bad for Main Street.

From paidContent.org, May 8, 2008:

The awkward pairing of Circuit City and Blockbuster is past the spitball phase and into the handholding phase. The struggling electronics giant says it will allow Blockbuster and its investor Carl Icahn to conduct due diligence into the company, and it says it has hired Goldman Sachs to help it explore strategic alternatives. But it notes that no agreement has been made yet, and you can assume that it would like to know what else is out there before going with Blockbuster. In its initial announcement, Blockbuster said that its purchase offer could include shares and cash, in the (off) chance that CC shareholders wanted to keep a stake in the new company. Most likely, they just want cash.

One of Circuit City's concerns had been financing. How would Blockbuster pay for the buy which comes to over $1 billion? The answer it got from Blockbuster is that Carl Icahn could conceivably buy Circuit City himself (and merge it with Blockbuster) if Blockbuster couldn’t obtain financing directly.Release.

Not much new from Blockbuster’s end. It's "pleased." Release.

Blockbuster first announced in mid-April that it was interested in acquiring Circuit City, for a premium of at least 54 percent over its then closing price. Analysts investors pretty much hated it off the bat, not really getting the vision, or understanding how the two made sense together.

From Silicon Alley Insider, May 9, 2008:

The most pressing question for Google (GOOG) shareholders is what product will drive the company's next growth boom as the search product cycle ends. Most likely candidate? Not sexy mobile or video. Just boring old display ads.

Google has been serving display ads on other sites for years, and the DoubleClick acquisition will accelerate that effort. Third-party display ads will only make a small contribution to the bottom line, however (10-20 cents on the dollar). So the key question here has been whether Google would deign to put display ads on its own sites.

In another sign it has "moved on" from Yahoo (at least for now), Microsoft has released members of its potential proxy board slate from their obligations, The Wall Street Journal reports.

The action follows a string of comments from Microsoft executives indicating Saturday's decision to walk away wasn't a negotiating tactic, including these Thursday from Microsoft's Chief Research and Strategy Officer Craig Mundie: "The market may wish that the Yahoo deal may come back together, but Microsoft at least at this point assumes it's over," Reuters reports.

Mundie did leave the door open a crack, adding: "Yahoo could always come back again and say please buy us for $33 (a share) and I'm sure we might reconsider it but we're not assuming that's going to happen."

Despite speculation big shareholders like Capital Research & Management and/or Legg Mason would push Yahoo to go back to the negotiating table, Wall Street is also moving on.

After suspending coverage during the negotiations -- to avoid conflicts of interest -- Yahoo M&A advisors Goldman Sachs and Lehman Brothers have reinstated coverage on Tech Ticker's parent, Dealbook reports.

Then again, Yahoo shares were up another 2.3% to $26.22 Thursday, meaning optimistic traders either smell another deal or are whistling past the graveyard.

From Silicon Alley Insider, May 8, 2008:

How's RIM's iPhone-killer BlackBerry 9000? Not bad! So says Kevin Michaluk of CrackBerry.com, who managed to get his paws on a way-before-release test unit from eBay.

Kevin's in the process of posting a multi-part, detailed review of the phone on his site, and the initial response looks good.