Raphael Stevens

The New Jersey Devils hockey team will select an area Black-owned business to be featured on player helmets for 13 of its home games this season.

P.K. Subban #76 of the New Jersey Devils skates against the Washington Capitals in a preseason game at the Prudential Center on October 04, 2021 in Newark, New Jersey.
Bruce Bennett | Getty Images

The New Jersey Devils hockey team and Prudential Financial announced on Wednesday that a Black-owned business logo will be featured on player helmets for 13 home games this season. The helmet patch asset, which is often used by companies for advertising, is being donated by Prudential Financial.
As part of a sponsorship rights extension, Prudential will select a business to receive the ad exposure on Devils’ player helmets starting Dec. 8 and continue for 13 selected home games. The helmet patch will provide a Black-owned business in-arena and TV ad exposure during Devils games. Prudential pledged to provide marketing consultation and financial advice for the business that it selects.

The patch donation combines incentives with Devils’ “Buy Black Program,” which was created to help minority-owned businesses in and around Newark, New Jersey, where the team is based. The number of Black-owned business owners declined 41% early in the pandemic, according to June data from the National Bureau of Economic Research.
But last month, Bloomberg reported that new research from Robert Fairlie, an economics professor at the University of California, Santa Cruz, shows operations among Black-owned companies increased by 38% compared to February 2020.

Black Owned Business sign in local storefront window, MisFits Nutrition, Queens, New York.
Lindsey Nicholson | Education Images | Universal Images Group | Getty Images

“We have an obligation to use this platform to drive change,” Devils President Jake Reynolds told CNBC on Wednesday. “As we know, Black businesses have been challenged on numerous levels. So the opportunity for us to take our brand and the platform we have to be able to drive awareness –  this is just the beginning for something we’re going to continue to build on.”
Last season, the NHL created the helmet patch asset to provide corporate partners extra inventory to compensate for pandemic losses. Brands also missed impressions due to the shortened 2020-21 season.
Prudential’s extension with the Devils is part of a make-good offering, which means it won’t pay extra. Prudential already pays the Devils roughly $5 million per season for naming rights to its Newark arena. That deal is worth approximately $105 million and expires in 2027.

The NHL started its 2021-22 season on Tuesday with a pair of national games on ESPN that featured the defending champion Tampa Bay Lightning versus the Pittsburgh Penguins, and the Seattle Kraken against the Las Vegas Golden Knights. 
The NHL received switched media partners last April when it returned to ESPN and added Turner Sports in a deal valued at over $1 billion. However, it’s not clear if the Black business selected will receive national games in the donation offer.
But those deals will help the NHL and its teams recover from losses over the last two seasons. The Devils are one of the many NHL teams that have decreased in value because of the pandemic, according to Forbes. The franchise is worth $530 million after declining 4% in 2020. Revenue also slipped to $152 million from $180 million.
The league is expecting to recover during its new campaign. NHL commissioner Gary Bettman told Sportsnet radio the league projects revenue “well into $5 billion” this season. “The vital signs are strong,” he said. “And all of our franchises are in good shape.”
Added Reynolds: “We’re very fortunate that we’ve been able to see a V-shape recovery bounce-back in our business.”
The Devils open their season at home against the Chicago Blackhawks on Friday.

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The shrinking U.S. workforce during the Covid pandemic is “going to cripple” the economic recovery, businessman Barry Sternlicht warned Wednesday.
The founder of Starwood Capital, which operates hotels as part of its broader portfolio, said the government should pay people to go back to work.
“The whole service economy is in a crisis,” he said. “The country can’t really work without its service people back.”

The shrinking U.S. workforce during the Covid pandemic is “going to cripple” the economic recovery, billionaire investor and businessman Barry Sternlicht warned Wednesday.
The founder of Starwood Capital Group, which operates hotels as part of its broader portfolio, said the federal government should pay people to go back to work, not to stay home.

“The whole service economy is in a crisis, whether it’s a restaurant, a pizzeria, a laundromat, a small shop. Amazon can raise wages, no problem,” but mom-and-pop shops can’t, Sternlicht said on CNBC’s “Squawk Box.”
Sternlicht said sometimes it’s not about the money.
As an example, he said one of his hotels in Brooklyn, New York, is trying to fill 40 jobs on its 220-person staff.
“It isn’t even what we pay,” he said. “They won’t leave their house or whatever they are doing.”
He said the low labor participation rate, while there are millions of job openings, is “really hurting the underbelly of the U.S. economy.”

Employment vacancies, which fell to 10.44 million during August, are still historically off the charts. The Labor Department’s latest Job Openings and Labor Turnover Survey, released Tuesday, showed the shortage was exacerbated by a record 4.3 million workers quitting their jobs in August.
The drop in the unemployment rate in September, despite a much weaker-than-expected hiring, came as the labor force participation rate edged lower. The labor force participation rate, a measure of people working or actively looking for work, has not roared back as business activity has surged with the lifting of Covid mitigation closures and restrictions.
The government, which has spent trillions of dollars to help unemployed people and struggling businesses, should direct any further efforts to incentivizing a return to work, Sternlicht said.
“They should actually pay people a bonus for going back to work and getting back in the labor force, off federal programs and state programs,” he said. “Then they tax them because they have a job.”
Sternlicht, who has described himself as socially liberal and fiscally conservative, said the Biden administration is “overdoing it in the wrong direction. All these support programs … may exacerbate that problem and encourage people to stay home. And the country can’t really work without its service people back.”
In 1991, Sternlicht founded Starwood Capital — which created Starwood Hotels, now part of Marriott — as well as other leisure brands. Starwood Capital focuses on global real estate, hotel management, the oil and gas sectors and energy infrastructure.

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General Motors’ recall of Chevrolet Bolt EVs is continuing to sideline production of the car.
GM said it’s extending downtime on the Bolt at a Michigan assembly plant by two more weeks, to Nov. 1, so it can focus on building battery modules needed for the recalled vehicles.

The Vermont State Police released this photo of the 2019 Chevrolet Bolt EV that caught fire on July 1, 2021 in the driveway of state Rep. Timothy Briglin, a Democrat.
Vermont State Police

DETROIT — General Motors’ recall of Chevrolet Bolt EVs is continuing to sideline production of the car.
The company has idled manufacturing at a Michigan plant since Aug. 23 so it can focus on building battery modules needed for the recalled electric vehicles. The company said Wednesday that it’s extending downtime on the Bolt at the Orion Assembly plant in suburban Detroit by two more weeks, to Nov. 1.

Manufacturing defects have caused at least 13 Bolts — the company’s flagship mainstream EV — to spontaneously catch fire, leading GM to recall every one of the electric cars since production began in 2016.
The manufacturing problems occurred at LG Battery Solution’s plants in South Korea and Michigan. The “rare manufacturing defects” in the Bolt EVs are a torn anode tab and folded separator that when present in the same battery cell increase the risk of fire, according to GM.
The automaker’s battery supplier, LG Chem, started shipping replacement modules for battery packs for more than 140,000 Bolt EVs earlier this month.
GM on Tuesday announced the automaker and LG have reached an agreement for the battery supplier to reimburse the automaker for the recall costs. As a result of the agreement, GM will recognize an estimated recovery in the third quarter that will offset $1.9 billion of $2.0 billion in charges associated with the recalls.
Separately, GM on Wednesday said production of the Chevrolet Equinox at Ramos Assembly in Mexico will take an additional three weeks of downtime due to the global shortage of semiconductors, through the week of Nov. 15.
Production of the Equinox in Mexico has been down since Aug. 16, while assembly of the Chevrolet Blazer that’s produced at the plant is expected to restart next week.

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The International Alliance of Theatrical Stage Employees said its union members will go on strike Monday if a new contact deal is not reached with the Alliance of Motion Picture and Television Producers.
IATSE has been bargaining with producers for months, advocating for better working hours, safer workplace conditions and improved benefits.
An industrywide strike would essentially stop Hollywood production in its tracks.

Donna Young of IATSE Local 700 Motion Picture Editors Guild, writes a message of fair wages for all on a union members car during a rally at the Motion Picture Editors Guild IATSE Local 700 on Sunday, Sept. 26, 2021 in Los Angeles, CA.
Myung J. Chun | Los Angeles Times | Getty Images

After more than a week of failed negotiations, the union representing Hollywood crews announced Wednesday that its members will go on strike Monday if they cannot reach an agreement on a new contract.
“The pace of bargaining doesn’t reflect any sense of urgency,” said Matthew Loeb, president of the International Alliance of Theatrical Stage Employees, in a statement Wednesday. “Without an end date, we could keep talking forever. Our members deserve to have their basic needs addressed now.” 

IATSE has been bargaining with producers for months, advocating for better working hours, safer workplace conditions and improved benefits. After talks stalled over the summer, IATSE’s membership voted to approve a strike if a deal could not be reached with the Alliance of Motion Picture and Television Producers, which represents major film and television production companies. The union said 90% of eligible voters cast ballots, with more than 98% in support of strike authorization.
“There are five whole days left to reach a deal, and the studios will continue to negotiate in good faith in an effort to reach an agreement for a new contract that will keep the industry working,” said Jarryd Gonzales, a spokesman for AMPTP.
IATSE represents a wide swath of industry workers, from studio mechanics to wardrobe and make-up artists. In total, it acts on behalf of 150,000 crew members in the U.S. and Canada. Around 60,000 of those are covered by the current TV and film contracts being renegotiated.
Its contract with AMPTP, which went into effect in 2018, ended July 31 and was extended until Sept. 10. IATSE is calling for a new three-year agreement that would give behind-the-scenes workers higher pay, meal breaks, improved contributions to health and pension plans and a bigger cut of profits from streaming productions.
An industrywide strike would essentially stop Hollywood production in its tracks, similar to what the writer’s strike did 14 years ago. That strike, between 2007 and 2008, led many shows to shorten or postpone new seasons and led to the cancellation of others.

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Ghislaine Maxwell, who is accused of acting as a procurer of underage girls for her friend Jeffrey Epstein’s criminal sexual activities, and prosecutors want a proposed questionnaire for potential jurors sealed from public view before her upcoming trial.
Epstein, a former friend of Presidents Donald Trump and Bill Clinton and Prince Andrew, died in jail from suicide while awaiting trial
Maxwell, a British socialite, is due to go on trial in November.

Jeffrey Epstein and Ghislaine Maxwell attend Batman Forever/R. McDonald Event on June 13, 1995 in New York City.
Patrick McMullan | Getty Images

Ghislaine Maxwell and federal prosecutors have temporarily teamed up to ask a judge to keep a proposed questionnaire for potential jurors sealed from public view before Maxwell’s upcoming trial.
Maxwell is the British socialite accused of acting as a procurer of underage girls to be sexually abused by her friend Jeffrey Epstein.

Prosecutors, in a letter to the judge filed in court late Tuesday evening, said Maxwell’s lawyers want the written questionnaire and proposed series of oral questions for would-be jurors kept secret “to avoid media coverage that may prejudice the jury selection process.”
“The Government consents to the defense’s request,” prosecutors from the U.S. Attorney’s Office for the Southern District of New York wrote to Manhattan federal Judge Alison Nathan, who is due to preside over Maxwell’s trial next month.
In the same letter, prosecutors noted that the submission of proposed jury questions includes notations of objections Maxwell’s lawyers and prosecutors have with particular questions suggested by either party.
Jury questionnaires as a rule include queries about whether a potential juror has prior knowledge of a criminal case, from news articles or other sources, whether they know people connected to the case, and whether they or people they know have been victims of crimes.
Nicholas Biase, a spokesman for the prosecutors’ office, declined to comment on the letter. A lawyer for Maxwell did not immediately respond to a request for comment.

British socialite Ghislaine Maxwell appears during her arraignment hearing on a new indictment at Manhattan Federal Court in New York, April 23, 2021, in this courtroom sketch.
Jane Rosenberg | Reuters

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She has pleaded not guilty in the case, and has been held without bail in a Brooklyn federal jail since last year pending trial. Her trial next month will deal only with the sex-related charges. She will be tried at a later date for the perjury case.
In another letter to Nathan filed Tuesday, prosecutors said their “conservative” estimate is that they will rest their case against Maxwell within four weeks from the start of the trial next month, but that they could rest “as early as the third week of trial” provided that cross-examination of witnesses by defense lawyers are not overly long.
Maxwell’s lawyers, according to the same letter, estimate their case will last about two weeks. But that could change after defense attorneys review the prosecutors’ witness and exhibit lists.
Both sides are asking Nathan to seat jurors for the trial who are available “beyond the Christmas holiday,” the letter said.

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Executive Edge

S&P 500 earnings growth estimates have been coming down for weeks, and for only the second time in 49 quarters, the estimates have continued down even after the last quarter-end of Sept. 30 and the start of Q3 reporting.
It is expected to be a make-or-break quarter for corporate guidance, and that really has not been the case in the massive market rebound from Covid.
Earnings growth of 88% last quarter may represent the peak of the pandemic easy comps, and now with oil prices high, inflation and wages rising, and supply chain issues all weighing on economic growth, the level of confidence from CEOs could be the biggest factor in giving investors a reason to bid a U.S. stock market currently trading above its 20-year average even higher.

The big issue for S&P 500 earnings in the third quarter hasn’t exactly snuck up on investors. The stock market has been struggling since September and the reason can be summed up in an index that is currently trading at a price-to-earnings ratio above its long-term average as many external factors, including rising commodity prices, wage inflation, general inflation, supply chain chaos, and interest rate policy become headwinds for stocks.
It was in the Fedex earnings which came out long before the major corporate earnings season started, with the shipper missing estimates by a lot, and that was after analysts had already taken estimates down in the runup to its earnings report. Making too much of any single earnings bellwether isn’t a good way to think about the S&P 500, especially as it is now dominated by tech, but the fact that analysts didn’t take Fedex earnings estimates down enough is notable for setting the tone for how companies come into earnings, and how different it may be this time around compared to all the other quarters since the Covid bottom.

A make-or-break quarter for the S&P 500

In the runup to Q2 earnings, growth estimates were rising for the S&P 500. That has not been the case this time, with growth estimates continuing to fall in the weeks ahead of the major earnings that began Wednesday with J.P. Morgan. Previous to the recent negative earnings revisions, there had been nothing but increasing estimates over the last 12 months. That’s one of the reasons stocks investors don’t need to struggle to understand why stocks have struggled since September.
“It was much easier to be bullish on US stocks when analysts were raising estimates virtually every week, as they did up” until September,” DataTrek Research noted in a recent report.
And that hasn’t changed this month. Sam Stovall, chief investment strategist at CFRA Research, says usually EPS estimates have begun to outpace the end-of-quarter estimate this early in the reporting cycle, but that’s not happening as major corporate earnings begin, with the S&P 500 continuing its trend of negative revisions, off by 1.7 percentage points through Oct. 11 versus Sept. 30. He cited higher-than-expected oil prices which Delta Air Lines commented on Wednesday, inflation, interest rates, and a continual lowering of Q3 GDP forecasts. Global growth continues to be downgraded as well.
According to Stovall, this may end up being only the second quarter out of 49 in which actual results were lower than end-of-quarter estimates.

Arrows pointing outwards

Typically, EPS estimates begin to outpace the end-of-quarter estimate this early in the reporting cycle, but not this time.
CFRA Research

“You invest in stocks because you want a piece of the action, and the action is earnings and dividends, and if action comes down in terms of earnings growth, that’s not good,” Stovall said. “We have seen 47 out of last 48 quarters (back to second quarter 2009), 47 out of 48 actual earnings have exceeded end-of-quarter estimates. And done so by an average of 15%,” he said.

Bank of America Global Research struck a similar tone in a note this week to clients this week, reminding them that earnings misses are extremely rare, but it added, “the main focus will be around guidance” which has started to soften, and will lead to 2022 EPS being revised lower. “We believe it will be a make-or-break quarter with all eyes on margins and supply chain,” the bank’s research team wrote.
Since the first quarter of 2020, which was only miss in the past 48 quarters, earnings growth has reached as high as 88% for the S&P 500 (Q2 2021). That is now down to 25% for Q3 as major earnings hit. And Stovall said that means if the bull market continues, investors should in the least expect the angle of expected ascent to be more moderate. “Q2 could be the best quarter in terms of percentage change in earnings growth,” he said. “It will continue to be positive, just positive at smaller percentage.”

Traders work on the floor of the New York Stock Exchange (NYSE), October 12, 2021.
Brendan McDermid | Reuters

Another positive way to read the earnings setup from the street: DataTrek Research still thinks analysts are too low on Q3 and Q4 earnings.
Some of the slower earnings growth is to be expected. Consumer discretionary is expected to post a decline of near-15%, but that is because it fell so much in 2020 that the sector posted triple-digit advances after the Covid low: 161% in Q1 2021 and 210% in Q2 2021.

The best of post-Covid earnings growth is over

Those kinds of earnings growth numbers “can’t repeat,” Stovall said, and that is one reason why analysts don’t want to be overly optimistic. And even as negative revisions to the S&P 500 earnings outlook hit almost every sector, especially the ones which had performed some of the biggest comebacks from Covid, including industrials, materials and consumer discretionary, Stovall stressed the earnings revisions are an indication the situation “could” be worse. Some of the sectors seeing the biggest negative earnings revisions are still expected to post significant growth. It is just up by lesser amounts.
Another way to think about it: “Investors are going through an earnings estimate realignment rather than engaging in negative earnings revisions,” Stovall said. “What they are really doing is saying we are in unprecedented times, we have had tremendous GDP growth, comparative GDP and earnings growth recently, and there is still an upwards trajectory, it’s just that because now we’re getting past the real slump period of 2020, forward estimates are going to be less and less enthusiastic.”
That comes back to what DataTrek co-founder Nick Colas says may be the difference between this quarter and every other recent quarter since the Covid outbreak: companies really need to deliver on guidance. Investors are now in the “show me” phase of the earnings recovery, and that is a big change, especially with the S&P performance year-to-date tightly correlated with the earnings expectations: U.S. large-cap stocks received a year-long tailwind from what had been estimates that came down too much amid Covid.

The S&P 500 price-to-earnings ratio

The price-to-earnings ratio of the S&P 500 has come down, from a peak in January 2021 of over 24x to roughly 21x, but that is still a 28% premium to the average P/E ratio since 2000.

Arrows pointing outwards

Valuations are a little rich in the S&P 500 and that means company guidance on earnings power that is above current expectations will be key for the market to move higher.
FactSet Research

The market is already trading at a P/E ratio that is above current expectations for earnings next year. That means even if analysts end up raising earnings estimates after better-than-expected numbers, stocks may not pop because it is already expected. What’s not baked into the S&P 500 is what companies say about 2022, and their margin structure given the push and pull of inflation, and how much they are having to pay for labor, and other unknowns like productivity impacts from work-from-home. “A whole range of conversations, that for the first quarter since Covid, we have to get into the weeds of cost structure for companies. It is no longer the ‘wow, beat by so much, that’s great,” Colas said. 
Actual earnings estimates for the S&P 500 don’t support a valuation higher than the 18x average of the past two decades and to get to a valuation of 21x, an earnings pop will be required. “Companies have had incredible earnings leverage in the past 12 month,” Colas said. But now for the S&P 500 to “just crawl” into its current valuation, investors will need to be convinced there is more upside coming in 2022. “What companies say about future earnings power, particularly anything about sustainable margins, that is what will drive the market,” he said. “Valuations are rich.”
That is why the message Wall Street analysts and the recent market volatility are sending can be summed up in a way that is central to this earnings season: the recovery chapter for earnings, from the lows of last year, is over.
“Growth from here will be slow and choppy and subject to external shocks, so how do you put some multiple on that? That’s the hard part,” Colas said.
The optimistic side of the current market multiple suggests investors still believe earnings power is sustainably higher than it was pre-pandemic, and has another 5%-10% more to go in revisions higher. And that makes the outlook from here all the more important.
Some basic things Colas is confident in saying today. No one is expecting a recession. GDP and earnings will grow. And big tech will be a bigger part of the S&P 500 a year from today.
But the right sustainable earnings growths numbers have not been a factor since the Covid bottom. They are again now, and the market won’t really start again unless CEOs can convince investors that outlook is strong.
“It has not been true in the last four quarters that guidance is the most important thing,” Colas said. “The earnings surprises have been so large. … Now that stops.” More

Delta says about 90% of its roughly 80,000 employees are vaccinated.
The Atlanta-based airline plans to charge unvaccinated employees $200 more a month for health care starting next month.
Rivals American, Southwest are mandating vaccines under a Biden administration rule for federal contractors.

Gate agents assist travelers at a Delta Air Lines Inc. bag drop counter at the San Diego International Airport (SAN) in San Diego, California, U.S., on Monday, April 27, 2020.
Bing Guan | Bloomberg | Getty Images

Delta Air Lines said Wednesday 90% of its workforce of about 80,000 people have been vaccinated against Covid-19, weeks before the company imposes a $200 monthly insurance surcharge on staff who haven’t gotten shots.
The Atlanta-based airline’s CEO Ed Bastian earlier this month said about 85% of its staff was vaccinated.

On Wednesday, Bastian said he expected that rate to rise to about 95% by early November.
The latest tally, disclosed in its quarterly earnings release, comes as airlines are grappling with the Biden administration’s rules that federal contractors’ employees must be vaccinated against Covid, unless they can show a valid religious or medical reason to be exempt.

American Airlines, Southwest Airlines, JetBlue Airways and Alaska Airlines, which like Delta are federal contractors because they fly government employees and provide other services, in recent weeks have told staff they will comply with the mandate and that employees need to be vaccinated to continue working there, unless they receive an exemption. That means staff needs to be fully vaccinated by Dec. 8.
Delta’s Bastian said its own plan is working.
“We haven’t done it with a mandate,” Bastian said in an interview with CNBC’s “Squawk Box.” “We have done it working collaboratively with our people, trusting our people to make the right decisions for themselves, respecting their decisions, but at the same time avoiding the divisiveness of what the mandate is posing to society.

“I think the spirit of the [federal] mandate was to get people vaccinated. It wasn’t to try to force people with the threat of their jobs if companies are doing the right thing,” Bastian said.
Delta in August announced that it will raise health insurance premiums by $200 a month on staff that aren’t fully vaccinated by Nov. 1, citing rising health insurance costs. Bastian told employees at the time it costs the company, which self-insures its employees, an average of $50,000 every time an employee is hospitalized for Covid.
“All Delta employees who have been hospitalized with COVID were not fully vaccinated,” he said at the time.
Pilots unions at Southwest and American, which each say they are not anti-vaccine, have fought the mandate. The Allied Pilots Association, American’s pilots’ union, wrote to the White House and lawmakers last month asking for exemptions for pilots, while Southwest’s pilots’ union asked a court in Texas last week to block its implementation.
United Airlines issued its own company mandate in August, threatening to fire people who weren’t vaccinated by Sept. 27. More than 96% of its U.S. employees are now vaccinated, it said.
On Tuesday, Texas-based carriers American and Southwest said they expected the federal vaccine mandate to supersede an order by Texas Gov. Greg Abbott that bars businesses and others from mandating the vaccine for employees.

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