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With the debt ceiling over, here's the next problem for investors: Morning Brief

The tentative debt ceiling deal between President Joe Biden and Speaker Kevin McCarthy is a much welcomed way for investors to return from the Memorial Day holiday weekend. Default risks are off the table for the next two can-kicking years.

On paper, the resolution should bring some calm to debt markets and ratchet down the commentary coming from C-suite leaders at various investment bank conferences this week and in June.

By no means is the deal perfect.

One has to wonder how consumer spending will be impacted as the freeze on student loans gets lifted in early September as part of the agreement. And two, the government spending caps could take a bite out of the economy.

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But at least for today, a teensy bit of calm to a market that had grown jittery the past two weeks (see small-cap and defense stocks lagging, for instance).

Don't get too comfortable, however.

The market will now shift its gaze the Federal Reserve and whether it will lift interest rates at its June 14 meeting. Pros say it's a true toss up which direction the Fed will go, suggesting any debt ceiling market calm may prove short-lived.

"In our view, the decision on whether to raise rates is so finely balanced that it could still go either way depending on how events unfold between now and the meeting," points out UBS senior economist Brian Rose. "At one point, markets had almost completely priced out another hike, but currently the market sees around a 50% chance of one more hike, either at the June meeting or at the following meeting on 25–26 July."

There are strong cases for both.

Inflation is still far above the Fed's 2% target and the unemployment rate is at a historically low 3.4%. The latest University of Michigan consumer sentiment report showed long-run inflation expectations near 20 year highs.

If this Friday's May employment report hits above the consensus of around 200,000, it would be yet another data point to push the Fed into one more rate increase.

Markets wouldn't like that, and could trade off into the June Fed meeting.

On the other hand, the Fed has lifted rates 500 basis points from the lows. That's a lot of tightening, and it's beginning to show up in the economy.

Consumers are cutting back on discretionary purchases, as we learned from earnings out of Target, Best Buy, Walmart, RH and Urban Outfitters last week. You will likely sense a similar vibe in earnings out this week from Dollar General and Macy's.

Inflation has in fact trended lower.

Auto delinquencies are on the rise, as closely followed Apollo Group economist Torsten Slok noted in a piece of weekend research that crossed my inbox.

"The economy is balanced on a knife's edge," United Airlines CEO Scott Kirby told me last week on Yahoo Finance Live. "When the Silicon Valley banking scare started, we saw a 15% overnight drop in business bookings, and that tells you the economy is very fragile."

These economic clues suggest that the Fed needs to chill out with rate hikes before it induces a recession, or worse.

All in all, a tough call by the Fed soon.

And that means it remains a tough call among bulls and bears...despite the debt ceiling debacle hibernating for two years.

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Tips on the banking crisis? Email brian.sozzi@yahoofinance.com

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