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Dow, S&P post third-straight quarterly gain as post-Brexit recovery continues

U.S. stocks closed higher Thursday, the last day of the quarter, in their third-straight day of recovery from the post-Brexit sell-off.

The Dow Jones industrial average rose nearly 1.4 percent for the quarter, while the S&P 500 rose 1.9 percent for their third-straight quarter of gains.

The Dow closed about 235 points higher with 3M, IBM and Goldman Sachs the top contributors to gains as all constituents except Visa rose. Consumer staples rose 2.2 percent to lead all 10 S&P 500 sectors higher.

"I think it's a continuation of trying to sort out what Brexit means and what's important to investors," said Bruce McCain, chief investment strategist at Key Private Bank. "Whether they decide it means nothing, ... were going to have to wait and see."

The major indexes posted three-straight day of plus-1 percent gains for the first time since February.

With recent gains, the Dow had recovered about 80 percent of its post-Brexit losses intraday Thursday.

"The market is breathing a big sigh of relief that Brexit didn't trigger the end of the world," said Adam Sarhan, CEO of Sarhan Capital.

However, traders noted some of the recent recovery in stocks was around quarter-end and month-end flows.

Sterling fell more than 1 percent intraday, back towards 30-year lows touched last week following the Brexit vote, after the Bank of England Governor Mark Carney said further stimulus measures may soon be needed for the U.K. given the country's vote to leave the EU.

Pound sterling was last near $1.33, a touch off session lows. The U.S. dollar index traded mildly higher, with the euro near $1.11 and the ye near 103.3 yen versus the greenback.

"For now, the British exit is taking a backseat, but that's going to come back to haunt us," said Peter Cardillo, chief market economist at First Standard Financial.

The Dow had lost more than 870 points in the two sessions following the U.K.'s shocking vote to leave the European Union, but the blue-chips index completed its best two-day points gain since last August at Wednesday's close.

"It's not surprising to see the markets go down as much as they did after the vote," said Brian Levitt, senior investment strategist at OppenheimerFunds. "The best and worst days are usually grouped together."

Leading gains in consumer staples, shares of Hershey surged 16.8 percent amid talks of a possible takeover bid from Mondelez. However, Hershey's board unanimously rejected Mondelez's offer Thursday afternoon.

"It would take a very good offer" for the board to approve a takeover bid, said Kim Forrest, senior equity analyst at Fort Pitt Capital. "I don't see anybody doing that."

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Energy jumped more than 10 percent for the quarter as the best performing S&P sector over that time, while information technology and consumer discretionary were the only negative sectors for the quarter.

"The most constructive thing I've seen over the past four days has been the rotation," said Art Hogan, chief market strategist at Wunderlich Securities, noting the S&P was led by financials, health care and energy on Wednesday, while utilities, telecommunications and consumer staples lagged. "We had a rotation ... into growth."

The Nasdaq composite closed higher on the day but posted its second-straight quarterly decline with a loss of more than half a percent. The iShares Nasdaq Biotechnology ETF (IBB) lost 1.3 percent for the quarter.

Amazon.com had the greatest positive impact on the Nasdaq 100 for the quarter, while Apple had the greatest negative impact.

First Standard's Cardillo said "some traders are probably going to make there final trades Thursday instead of tomorrow," given the Fourth of July Holiday on Monday.

Oil prices were under pressure Thursday, with U.S. crude settling 3.1 percent lower, at $48.33 a barrel. On Wednesday, WTI gained more than 4 percent amid a larger-than-expected crude stocks drawdown.

Treasury yields were lower, with the 2-year yield near 0.59 percent and the 10-year yield around 1.48 percent.

On the data front, weekly jobless claims came in at 268,000, slightly above the expected 267,000. The Chicago PMI reading for June came in at 56.8, well above a May reading of 49.3.

"US manufacturing remains around the flat line with still challenged global trade but with some relief from the US dollar which has been weakening since early December notwithstanding the bounce this week post UK vote. With also punk capital spending, it is the US consumer that remains the buffer between economic expansion and contraction," Peter Boockvar, chief market analyst at The Lindsey Group, said in a note to clients.

St. Louis Fed President James Bullard in a speech in London on Thursday repeated the new monetary policy framework, including just a single rate hike for the foreseeable future, detailed in an earlier speech, according to a Reuters report.

Overseas stock markets were mostly higher, with the pan-European Stoxx 600 index gaining 1 percent. In Asia, the Nikkei 225 posted modest gains overnight, while the Shanghai composite slipped about 0.1 percent.

In corporate news, film studio Lions Gate said it would buy Starz for $4.4 billion in a cash-and-stock deal.

Meanwhile, the Federal Reserve's stress test approved the capital plans for 31 of 33 banks, with Deutsche Bank and Banco Santander failing to gain the central bank's approval.

Symbol
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DJIA
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S&P 500
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NASDAQ
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The Dow Jones industrial average closed up 235.31 points, or 1.33 percent, at 17,929.99, with General Electric leading advancers and Visa the only decliner.

The S&P 500 closed up 28.09 points, or 1.36 percent, at 2,098.86, with consumer staples leading all 10 sectors higher.

The Nasdaq composite closed up 63.43 points, or 1.33 percent, at 4,842.67.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded lower near 16.

About four stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of nearly 1.4 billion and a composite volume of 4.5 billion.

Gold futures for August delivery settled $6.30 lower at $1,320.60 per ounce.

On tap this week:

Friday

Vehicle sales

9:45 a.m. Markit manufacturing PMI

10:00 a.m. ISM manufacturing

10:00 a.m. Construction spending

11 a.m. Cleveland Fed President Loretta Mester on economic outlook and monetary policy

*Planner subject to change.