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S&P 500 Reaches Record Closing High Despite Geopolitical Concerns

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Stocks fluctuated after an initial jump but maintained a positive bias throughout the trading session on Thursday before closing significantly higher. With the continued advance, the S&P 500 ended the session at a new record closing high.

The Dow and the S&P 500 reached new highs for the session in late-day trading but pulled back going into the close. The Dow jumped 249.17 points or 0.9 percent to 26,753.17, the Nasdaq climbed 64.02 points or 0.8 percent to 8,051.34 and the S&P 500 surged up 27.72 points or 1 percent to 2,954.18.

The jump at the start of trading came as traders continued to react positively to the Federal Reserve's monetary policy announcement on Wednesday.

The Fed left interest rates unchanged as widely expected but signaled that the next change in interest rates is likely to be a rate cut.

While the Fed did not provide a specific time frame for lowering rates, CME Group's FedWatch Tool shows the markets are pricing in a rate cut at the next monetary policy meeting in late July.

The FedWatch Tool currently indicates a 65.7 percent chance for a 25 basis point rate cut and a 34.3 percent chance for a 50 basis point rate cut.

Traders are likely to closely watch incoming economic data in the weeks leading up to the meeting for clues about the potential for lower rates.

Stocks gave back some ground in mid-day trading after President Donald Trump told reporters, "You'll soon find out" if the U.S. will retaliate after Iran shot down an unmanned U.S. surveillance drone.

Iran's Revolutionary Guard has argued the drone was flying over Iranian territory, while the U.S. has claimed the drone was over international waters when it was shot down.

Trump later suggested the downing of the drone may have been unintentional but still refused to say whether the U.S. would retaliate, repeatedly saying, "You'll find out."

On the U.S. economic front, Labor Department released a report this morning showing a modest decrease in first-time claims for U.S. unemployment benefits in the week ended June 15th.

The report said initial jobless claims dipped to 216,000, a decrease of 6,000 from the previous week's unrevised level of 222,000. Economists had expected jobless claims to edge down to 220,000.

A separate report from the Philadelphia Federal Reserve showed regional manufacturing activity was nearly stagnant in the month of June.

Sector News

Gold stocks moved sharply higher on the day, extending the strong upward move seen over the course of the previous session. The NYSE Arca Gold Bugs Index surged up by 5 percent to its best closing level in well over a year.

The rally by gold stocks came as the price of the precious metal skyrocketed amid geopolitical concerns, with gold for August delivery soaring $48.10 to $1,396.90 an ounce.

Similarly, a jump by the price of crude oil contributed to significant strength among energy stocks, as crude for July delivery spiked $2.89 to $56.65 a barrel due to rising tensions between the U.S. and Iran.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index jumped by 3.7 percent, while the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index shot up by 2.4 percent and 2.1 percent.

Computer hardware, software, housing, and chemical stocks also saw considerable strength on the day amid broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan's Nikkei 225 Index advanced by 0.6 percent, while Hong Kong's Hang Seng Index jumped by 1.2 percent.

The major European markets also moved to the upside on the day. While the German DAX Index climbed by 0.4 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both rose by 0.3 percent.

In the bond market, treasuries pulled back off their best levels but still finished the session in positive territory. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.8 basis points to 2.001 percent.

Looking Ahead

A report on existing home sales is due to be released on Friday but may be overshadowed by any developments on the geopolitical front.

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