Credit spread check/Small business look/Taiwan loving the AI spend

As Powell just spoke early last week, I don't expect anything new today in his prepared testimony and Q&A notwithstanding Friday's payroll report where the unemployment rate at 4.1% is now above the Fed's dot plot yr end 2024 median estimate of 4%. He also won't pre-commit today ahead of Thursday's CPI. That said, I'm becoming more convinced that they will cut in September. 

It's time again to watch the credit markets as the CCC spread to Treasuries has quietly risen to the widest since February at 864 bps. This would correlate somewhat to the poor performance of small cap stocks. The overall high yield index spread however is still VERY tight at 310 bps but something to watch from here. Regardless of the tight spread though, the yield to worst is still 7.8% vs 5.1% as we entered 2020. CCC credits are paying 13.25% to borrow vs about 10% in early 2020. 

CCC Credit Spread

High Yield Credit Spread

Speaking of small businesses, the June NFIB small business optimism index rose to 91.5, up 1 pt from May. While still well under its long term average of 98, it is the best read since December when it was at 91.9.