1. On May 3 (Friday), the futures of the three major US stock indexes rose sharply before the US stock market. As of press release, Dow futures were up 0.76%, S&P 500 futures were up 0.39%, and NASDAQ futures were up 0.66%.

2. As of press release, the German DAX index rose 0.35%, the UK FTSE 100 index rose 0.46%, the French CAC40 index rose 0.53%, and the European Stoxx 50 index rose 0.51%.

3. As of press release, WTI crude oil rose 0.32% to $79.20 per barrel. Brent crude rose 0.41% to $84.01 per barrel.

Market news

“Wall Street's Most Accurate Analyst” warns of risk: if the job market weakens, sell US stocks quickly! The US non-farm payrolls report for April will be released tonight at 20:30 Beijing time. Prior to that, Michael Hartnett, who has the title of “Wall Street's Most Prospective Strategist,” issued a report warning that weak employment reports would be a sign of stagflation, which would increase the possibility of the stock market being sold off. If the US Department of Labor's report on Friday shows that fewer than 125,000 new jobs were added in the US in April, and the average hourly wage increased by more than 0.4% compared to the previous month, then this would be a report reminding “the risk of stagflation avoidance.” On the other hand, Hartnett wrote in the report that if the number of employed people increased by more than 225,000 and the average hourly wage increased by less than 0.2%, this would be interpreted as “Goldilocks, risk return.” Currently, the market generally expects that the number of non-farm payrolls in the US will increase by 240,000 in April, and the average hourly wage may increase by 0.3% compared to the previous month.

Hedge funds seek safe haven in volatile markets, and defensive stocks have become new favorites. The investment community is becoming more cautious due to geopolitical uncertainty, changes in interest rates, and poor stock market performance. According to data provided by Goldman Sachs Group's brokerage business division, hedge funds increased defensive stock positions in their portfolios at the fastest rate in eight months in April, while also becoming net sellers of global stocks, ending the previous four consecutive months of buying. In the process, healthcare stocks attracted the most capital inflows, while non-essential consumer goods stocks experienced their biggest net sell-off in seven months. Keith Lerner, co-chief investment officer of Truist Wealth, believes it is reasonable for hedge funds to take a more defensive stance. He pointed out that despite strong market performance in the first quarter, the current increase in the volatility of interest rates and inflation has undoubtedly put pressure on the market.

Options traders don't believe Powell and still predict the possibility that the Federal Reserve will raise interest rates before the end of the year. After Federal Reserve Chairman Powell said interest rate hikes were “unlikely,” options traders are still predicting the possibility that the central bank may raise borrowing costs before the end of this year. According to Ben Emon, senior portfolio manager and head of fixed income at NewEdge Wealth in New York, as of Thursday, options associated with overnight guaranteed financing rates (SOFR) showed that the probability of interest rate hikes in September or December was about 18% and over 20%, respectively. Emons also pointed out that options traders see a 3.1% chance of interest rate hikes in June. The overnight secured financing rate is a broad measure of the cost of overnight borrowing secured by treasury bonds. SOFR is the successor to the London Interbank Borrowing Rate (Libor). Options traders have been wary of the risk of interest rate hikes and multiple rate cuts.

Stagflation concerns are dominating the headlines! Bank of America proposed a plan: buy these two sectors. Mention of the term “stagflation” in headlines last week soared to its highest level in two years, which could begin to affect Wall Street sentiment, according to Bank of America. Stagflation refers to a situation where economic growth is sluggish and inflation remains high, as shown by recent data for the first quarter. Although analysts say it's still too early to officially announce that the US economy is in stagnation, Bank of America still warns that a series of shocking headlines can easily change the market narrative. The bank said utilities and energy are the best areas to invest in for those looking to take full advantage of the current situation and protect their portfolios.

Did the Federal Reserve successfully bail out the market? “Wall Street magic operator”: The sell-off wave is over. Tom Lee (Tom Lee), head of research at Fundstrat and one of the most optimistic stock forecasters this year, said that the wave of sell-offs in US stocks may have ended, and the five bullish signals sent by the Federal Reserve at the latest policy meeting laid the foundation for the May rally. Lee is one of the few well-known Wall Street analysts who expect the market to rebound in 2023. The target price he set for the S&P 500 index (SPX) last year was only more than 30 points away from the index's final price. According to reports, among the strategists tracked by Bloomberg, his predictions were the closest, and he was nicknamed the “Wall Street God Operator.” Lee pointed out in a video sent to Fundstrat customers on Wednesday that the May Federal Open Market Committee (FOMC) meeting triggered a brief rise in the stock market.

Individual stock news

Apple (AAPL.US) announced the largest repurchase plan in history, and iPhone sales slightly exceeded expectations. After the US stock market closed on Thursday, Apple announced its second-fiscal quarter earnings report. The company announced the largest share repurchase plan of 110 billion US dollars in history, and increased quarterly dividends for the 12th year in a row. Affected by this news, Apple's stock price rose 7.7% after the market. If this increase continues until the opening of the market on Friday, it will increase its market value by more than 200 billion US dollars. The reason why Apple was able to implement such a large-scale buyback is because the company's free cash flow scale has been leading the market over the past 12 months. Prior to the announcement of the financial report, Apple's cash flow level was about 107 billion US dollars. In the second fiscal quarter, Apple's total revenue was US$90.75 billion, down 4.3% from the same period last year. The market forecast was US$90 billion. The company's net profit was US$23.636 billion, down 2.2% year on year, but higher than market expectations of US$23.17 billion, compared to US$24.16 billion in the same period last year.

As the impact of the Middle East conflict intensifies, Booking (BKNG.US) expects room reservation growth to slow in Q2. Online travel company Booking Holdings had first-quarter revenue of US$4.415 billion, up 16.9% year on year, exceeding market expectations of US$4.25 billion; net profit of US$776 million, up 192% year on year; and diluted earnings per share were US$22.37, compared to US$7.00 in the same period last year. The company's adjusted EBITDA was $898 million, and Wall Street expected $718.6 million. Non-GAAP earnings per share of $20.39 exceeded expectations of $14.22. Booking's total travel bookings in the first quarter were US$43.5 billion, up 10% year on year, by category. Among them, the number of night room reservations increased 8.5% year over year to 297 million; the number of car rental days increased 10.7%, while the company's ticket sales in the first quarter increased by 33.1% over the same period last year.

Apollo Global Management (APO.US) teamed up with Sony (SONY.US) for 26 billion dollars! It is proposed to buy Hollywood giant Paramount (PARA.US) at a double premium. According to people familiar with the matter, Sony and Apollo Global Management plan to spend 26 billion US dollars to buy film and television giant Paramount Global. This would be an all-cash offer to buy Paramount shares and incur debt. The offer expresses interest in the acquisition of Apollo and Sony and is not binding. Apollo's bid for an acquisition this time is more than enough to buy two Paramons. By the end of the US stock market on Thursday, Paramount's market value was less than 9.8 billion US dollars. Paramount controlled by Shari Redstone (Shari Redstone) has been considering a merger proposal from David Ellison (David Ellison), the head of Skydance Media and the son of the co-founder of Oracle. Exclusive talks between Paramount's board of directors and Ellison are scheduled to end on Friday.

The antitrust duel between Google (GOOGL.US) and Epic Games has entered a new round, and the May hearing is the focus. Google has taken new legal action in its recent antitrust battle to meet the challenge of Fortnite developer Epic Games. Google said in documents submitted to the court that the solution proposed by Epic Games would seriously hinder Google's competitiveness. According to information, Epic Games successfully persuaded a San Francisco federal court jury in a high-profile legal lawsuit last year to accuse Google of illegally restricting market competition by controlling app downloads on Android devices and charging for in-app transactions. Epic Games also argues that it should be allowed to introduce the Epic Games Store on the Android platform without barriers. An injunction hearing on this proposal is expected to be held on May 23.

Key economic data and event forecasts

20:30 Beijing time: After seasonal adjustment of changes in the US non-farm payrolls population in April (10,000).

22:00 Beijing time: US ISM non-manufacturing PMI for April.

The next day at 01:00 a.m. Beijing time: US 10-year treasury bond auction on May 7 - total amount (100 million US dollars), total number of US drills (units) for the week ending May 3.

The next day at 03:30 a.m. Beijing time: The CFTC released the weekly position report.