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NEW YORK (CNNMoney.com) -- Stocks looked set for an upbeat start Wednesday as European markets rally but traders remain wary of high oil prices.

At 8:16 a.m. ET, Nasdaq and S&P futures were narrowly higher, suggesting a stronger opening for Wall Street.

Stocks rebounded Tuesday, as bargain hunters scooped up shares pummeled in the recent selloff and oil futures sank more than $5.

"Europe is up following yesterday's gains and I think that's adding some enthusiasm to the market," said Peter Cardillo, chief market economist at Avalon Partners.

Cardillo thinks Wednesday's session will be mixed and that the market will follow the price of oil.

"The key here is whether or not the market is attempting to put in a bottom and if it will go lower before it finds one," he added.

Energy Oil prices rebounded Wednesday after Iran test-fired missiles. Crude for August delivery was up $1.82 at $137.86 a barrel in electronic trading.

Oil traders are also keeping an eye on a weekly report on fuel inventories from the U.S. Department of Energy. That report is due at 10:35 a.m. ET.

Analysts expect oil stockpiles fell last week by 1.9 million barrels, according to a survey by energy research firm Platts. Gasoline inventories are forecast to show a build of 500,000 barrels and distillate fuel is expected to have risen by 2.2 million barrels last week.

European markets Stocks were higher midday in Europe following the upward trend in U.S. markets on Tuesday.

Speculation that British and Australian investment banks are poised for a recovery helped counter weak economic data from Germany - the EU's largest economy - and supported European markets.

Britain's FTSE 100 stock index rose 1.33%, Germany's DAX index rose 1.2% and France's CAC-40 rose 1.38%.

Earnings Alcoa (AA, Fortune 500) unofficially kicked off the second-quarter earnings period. The aluminum giant posted a drop in quarterly profit, but the company's results topped the consensus estimate of Wall Street analysts.

General Electric (GE, Fortune 500), a fellow Dow component and stock market bellwether, will report its second-quarter results on Friday.

Retail Closely held retail chain Steve & Barry's is close to filing for bankruptcy after being hit hard by the economic downturn and credit crunch, according to published reports.

Sears Holdings (SHLD, Fortune 500) is interested in the acquisition of some of the clothing chain's labels as well as possibly offering a bailout, the reports said.

Housing The number of people applying for a home loan increased last week despite rising interest rates, according to a survey.

The Mortgage Bankers Association's (MBA) application index rose 7.5% to 513.4 during the week ending July 4, from 477.7 a week earlier.

The MBA report showed the average rate for traditional, 30-year fixed-rate mortgages rose to 6.43% during the week, from 6.33% the previous week.

The average interest rate for 15-year fixed-rate mortgages rose to 5.94% and rates for one-year adjustable-rate mortgages rose to 7.24%

Other markets. In global trade, Asian markets rebounded on Wall Street's advance. European stocks also rallied in morning trading.

The dollar fell against the euro. The 15-nation currency bought $1.5712 in morning trade, up from $1.5657 late Tuesday in New York.

Bond prices were mostly higher. The benchmark 10-year note gained 7/32 to 99 29/32, lowering its yield to 3.88% from 3.9% on Tuesday.

Gold fell $3.30 to $920 an ounce in premarket trading.