Markets May Rebound on Better than Expected Retail Sales and Bargain Hunting

The major U.S. Index futures are pointing to a higher opening on Monday. The significant pullback in the previous couple of sessions lays a solid foundation for a rebound, and the release of better than expected retail sales for July may turn out to be the positive catalyst that the markets are waiting for. Global cues have also been very encouraging. Higher metal prices could offer support to the resources space. Nonetheless, caution cannot be ruled out ahead of key inflation reports, due out in the week. Despite the week’s turmoil over a potential liquidity crisis emanating from the offshoots of the subprime mortgage crisis, the major averages ended the week ended August 10th on a positive note. The indexes turned higher after posting weekly losses in each of the previous three weeks. Bargain hunting lifted stocks on Monday, as traders bought into beaten down financial stocks. The buying momentum was sustained on Tuesday, even though the Federal Reserve did not alter its language markedly to imply a dovish stance. Solid earnings from networking giant Cisco Systems (CSCO) helped sustain the momentum in Wednesday’s session, as the Dow notched up triple-digit gains and the Nasdaq Composite advanced over 2%. However, Thursday’s session turned out to be a nightmare for the markets, as a confession by French bank BNP Paribas that it is suspending three of its mortgage-backed funds with exposure to U.S. subprime market send stocks into a tailspin. The financial market turbulence forced central banks of major countries to pump in money to sidestep a credit crisis. Despite showing significant weakness for most of Friday’s session, the major averages closed on a mixed note on Friday.