Hiring pickup?

The biggest news for investors this morning will be the non-farm payrolls report for September, which will shed light on the economic recovery and much more. The U.S. only added a mere 235K jobs in August - following the big gains seen over June and July (+850K and +943K) - meaning the latest numbers will determine if August was a blip or a sign of bigger problems. The figures will also be key for monetary policy as the central bank plans to slow its $120B-per-month bond buying program.

What to watch: Economists forecast the U.S. added 500K jobs last month as COVID cases trended downward and enhanced unemployment benefits expired. The unemployment rate is also expected to tick down to 5.1% (from 5.2%), while average hourly earnings are seen rising by 0.4% (from 0.6%). Other important figures include how people are entering the workforce amid a labor shortage, as well as what sectors are hiring or experiencing slowdowns.

While inflation and supply chain risks remain big headwinds for the market, today's data will shed light on the No.1 risk going forward: tapering. "A steadily improving U.S. labor market and solid U.S. economic growth should provide the Federal Reserve with the green light to start curbing its quantitative easing program," UBS wrote in a research note. Fed Chair Jerome Powell even provided some color about what that would look like at his last press conference on Sept. 22.

Quote: "So, you know, for me, it wouldn't take a knockout, great, super strong employment report. It would take a reasonably good employment report for me to feel like that test is met. And others on the Committee, many on the Committee feel that the test is already met. Others want to see more progress. And, you know, we'll work it out as we go. But I would say that, in my own thinking, the test is all but met. So I don't personally need to see a very strong employment report, but I'd like to see a decent employment report." (4 comments)

Moving to Texas

Tesla (TSLA) is relocating its headquarters to Austin, Texas, from Palo Alto, California, as the great exodus from the Golden State continues. The announcement from Elon Musk came at the company's 2021 annual shareholder meeting, though he still detailed hopes that production at Fremont, along with Giga Nevada, would still be expanded (even by 50%). "It's tough for people to afford houses, and people have to come in from far away... There's a limit to how big you can scale in the Bay Area."

Flashback: On an earnings call in April 2020, Musk called California's COVID-related restrictions "fascist" in an expletive-laced rant. Last year, he also personally relocated to the Austin area from Los Angeles, where he had lived for two decades. The move allowed him to lower his personal tax burden and be closer to the SpaceX (SPACE) launch site in Boca Chica, Texas.

Tesla isn't the first company to move its headquarters out of California to Texas. Hewlett Packard Enterprise (HPE) and Oracle (ORCL) have shifted their base from Silicon Valley to Houston, while Charles Schwab (SCHW) relocated its HQ to the Dallas area from San Francisco. Texas lawmakers have been encouraging migration from the coasts through a combination of lower taxes, financial incentives and a business-friendly environment.

What else happened at the meeting? Musk said Tesla is likely to begin producing its Cybertruck late next year as it works through supply chain challenges. He also hopes the company will manufacture its long-delayed semitrailer truck and a revamped version of its Roadster sports car in 2023. Shareholders additionally re-elected Musk's brother Kimbal and James Murdoch to the board (Institutional Shareholder Services had advised against the re-election). (255 comments)

Grab the chips

Even if you weren't living under a foundry for the last year and a half, you probably noticed that there is a major chip shortage taking place across the globe. Prices on everything from electronics to autos have risen in response, given the tremendous demand for silicon and the lack of supply. However, those shortages are turning into big profits for some semiconductor giants, like Samsung Electronics (OTC:SSNLF).

By the numbers: The world's largest memory chip and smartphone maker estimated a 28% jump in its third-quarter operating profit. At 15.8T won ($13.3B), it would be Samsung's highest quarterly profit since the third quarter of 2018. The chip division's operating profit could even be 79% higher from a year earlier, according to analysts, with semiconductors accounted for about half of Samsung's operating profit in the first half of the year.

It's not all rosy. Samsung shares have slid more than 20% from their January peak due to concerns that the semiconductor industry could be entering a prolonged downturn. The stock "is under pressure due to worries that the semiconductor cycle will peak out and the company’s pricing power could be undermined by increasing inventories of customers," noted Kim Dong-won, analyst at KB Securities. Losses accelerated in September, when rival Micron Technology (NASDAQ:MU) said its memory chip shipments would slip in the near term because of part shortages.

Go deeper: The chip industry is still on a massive spending spree. Samsung is planning to invest $17B in a new Texas chip plant, Intel (NASDAQ:INTC) is building new chip factories in Europe valued at up to $95B, while Taiwan Semiconductor Manufacturing (NYSE:TSM) is spending a record $100B over the next three years to increase production capacity. The "painful period" of the semiconductor shortage could even extend beyond 2022, according to Marvell Technology (NASDAQ:MRVL) CEO Matt Murphy, who added that he's never seen anything like this during his "27 years in the business." (3 comments)

Global tax deal

Ireland has finally come around to a global minimum tax plan that G7 and G20 nations hope will combat tax evasion and standardize rules across the world. The country will give up its treasured 12.5% corporate tax rate by joining a group of 140 nations that have agreed to an effective levy of 15% on major multinationals. The new rate will affect 1,556 companies in Ireland employing 500K people, including tech giants like Apple (NASDAQ:AAPL), Google (GOOG, GOOGL), Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB), and will end up costing the country about €2B in lost revenues.

What happened? Dealmakers crossed out two words that changed the country's mind. The initial text mentioned a minimum corporate tax rate of "at least" 15%, but that was updated to just 15%, meaning the rate wouldn't be pushed up at a later date. Ireland was also given assurances that it could keep its lower rate for smaller companies operating in the country, ahead of an OECD meeting in Paris this weekend.

"In joining this agreement, we must remember that there are 140 countries involved in this process and many have had to make compromises," said Paschal Donohoe, Ireland's Finance Minister. "This is a difficult and complex decision but I believe it is the right one." Over the past five years, hi-tech companies have accounted for the majority of Ireland's €5B-€7B/year in foreign direct investment.

Outlook: The last remaining holdout for the deal in the EU is Hungary, after Estonia joined Ireland overnight in signing up to the accord. Over in the U.S., President Biden and Treasury Secretary Janet Yellen are also on board, though they face challenges of getting the agreement through Congress. The changes could require the Senate to alter existing tax treaties, which would take a two-thirds vote and at least some GOP support. Republicans have already expressed opposition to any rise in taxes, while some lawmakers have condemned the idea of ceding taxing authority to other governments. (38 comments)

Today's Markets

In Asia, Japan +1.3%. Hong Kong +0.6%. China +0.7%. India +0.6%.
In Europe, at midday, London +0.1%. Paris -0.3%. Frankfurt -0.1%.
Futures at 6:20, Dow +0.1%. S&P flat. Nasdaq flat. Crude +1% at $79.04. Gold flat at $1759.40. Bitcoin +2.7% at $55459.
Ten-year Treasury Yield +2 bps to 1.59%

Today's Economic Calendar

8:30 Non-farm payrolls
10:00 Wholesale Inventories (Preliminary)
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today »

What else is happening...

Senate passes short-term increase to the debt limit.

Bitcoin (BTC-USD) rally reflects increased use as inflation hedge - JPMorgan.

Pfizer (NYSE:PFE) asks FDA to authorize COVID vaccine for children ages 5-11.

Long holiday... Chinese stocks rise on return to trade.

Chubb (NYSE:CB) to acquire Cigna's (NYSE:CI) Asian life and A&H businesses for $5.75B.

Alibaba (NYSE:BABA) extends gains as it tops WallStreetBets mentions.

Conagra (NYSE:CAG) flags price increases to combat inflation impact.

Sundial Growers (NASDAQ:SNDL) buys Alcanna in C$346M all-stock deal.

IBM (NYSE:IBM) mandates fully vaccinated employees or face unpaid suspension.

Turkey requests to buy 40 Lockheed Martin (NYSE:LMT) F-16 jets and modernization kits