stocks fell wednesday after a surprise rate hike from the bank of canada took the air out of a tuesday rally major stock indexes came under pressure as the trading day wore on a day after the sp 500 and nasdaq composite set fresh highs for the year the benchmark sp 500 shed 04 the techheavy nasdaq lost 13 while the dow jones industrial average gained 03 the sp 500 briefly touched bullmarket territory wednesday morning but it didn’t last stocks’ declines were sparked by the bank of canada’s unexpected decision to raise interest rates to a 22year high after a fourmonth pause in tightening the central bank cited a strong labor market and consumer spending as risks to inflation’s path to its 2 target under the stockmarket hood marathon oil’s 49 rise propelled the sp 500’s energy sector tesla stock added 15 in its ride to a ninthconsecutive daily gain its longest winning streak since january 2021 according to dow jones market data shares of elon musk’s electricvehicle maker notched their highest close since late last year smallcap stocks surged wednesday despite broader market weakness the russell 2000 advanced 18 building upon a strong start to june after struggling for much of the year the bounceback suggests “the economy is more resilient than the headlines imply or that a recession could be milder than initially projected” said quincy krosby chief global strategist for lpl financial the us bond market didn’t seem to notice however as it was hit particularly hard by canada’s rate decision yields rose as prices fell reflecting worries that the federal reserve could have more rate increases coming—and it will be hard to know when exactly the yield on the 2year treasury climbed to 4548 from 4523 on tuesday while the 10year yield rose to 3782 from 3699 both yields have risen significantly from recent lows given expectations for tighter monetary policy and worries over the us government’s debt issuance america’s hot labor market resilient demand and sticky inflation have raised chances that the fed could opt to pause rate hikes when it meets next week before raising borrowing costs later on that would be a course of action with little precedent for the central bank derivatives markets now show the fedfunds rate ending the year at 51 about its current level expectations for where rates will finish the year have risen continuously since april the reserve bank of australia raised rates tuesday surprising analysts who expected a pause analysts have said that stopandgo central bank policy could induce volatility into markets just as they are ripe for a resurgence markets have lulled in recent weeks the cboe volatility index or vix—known as wall street’s fear gauge—slid to its lowest level since february 2020 jitters in the bond market were also similarly quieting coming into wednesday “volatility is like a spring coiling tighter and tighter” said george ball chairman of investment firm sanders morris harris “it’s flat or it falls then it explodes” supporting us stocks was a sign that the economy remains in good health americans upped their imports in april after canada’s rate move however traders flipflopped their stance on the data thinking perhaps strongerthanexpected spending would portend higher interest rates stocks’ rise this year is off a low floor analysts say despite nearing a newfound bull market the sp 500 is still well off its record high set early last year while the nasdaq and dow entered bull markets months ago they are also not near previous heights “many parts of the market are down sharply from previous highs” said ball “the rally is from a low base making the percentagepoint lift look more impressive than it otherwise would” elsewhere oil prices rose brent crude added 09 to 7695 per barrel recovering from losses the prior day with unknowns such as inflation interest rates and a potential credit crunch looming over markets analysts say many investors have been sitting on the sidelines this year flows into equity products “have been relatively anemic this year” according to nick kalivas invesco’s head factor and core equity etf strategist “there’s definitely people sitting on their hands” the inflows invesco has seen he said are plays toward weathering a potential market storm and bankingsector risks exchangetraded funds tied to shares of large tech firms and socalled quality stocks known for their healthy balance sheets and strong profitability have been in favor