The Dow and broader U.S. stock market set new highs on Wednesday, as investors shrugged off geopolitical tensions ahead of Independence Day. While there was no immediate catalyst for the rally, the Federal Reserve’s dovish policy shift continues to offer fuel for the record-setting pump.

Dow Hits New Highs; S&P 500 Follows

All of Wall Street’s major indexes reported gains in the holiday-shortened session. The Dow Jones Industrial Average climbed 179.32 points, or 0.67%, to 26,966, a new record high.

The broad S&P 500 Index of large-cap stocks advanced 0.8% to 2,995.61, which was also a record. All 11 primary sectors reported gains, with real estate and consumer staples rallying more than 1%.

The technology-focused Nasdaq Composite Index jumped 0.8% to a new all-time high of 8,170.23.

A measure of implied volatility known as the CBOE VIX held near two-month lows on Wednesday, which is a testament to the market’s recovery in the last six weeks. The so-called “fear index” reached a session low of 12.58 on a scale of 1-100 where 20-25 represents the historic average.

The Fed Factor

After a disastrous May, U.S. stocks have been on a fast track to recovery thanks in large part to the Federal Reserve. Chairman Jerome Powell got the party started last month when he said lower interest rates were on the table.

Those comments were echoed by other central bank officials and later reflected in the official June policy statement, which dropped the word “patient” from its forward guidance. Now, traders are pricing in a July interest rate cut with 100% certainty.

Signs of a slowing economy will give the Fed enough justification to slash interest rates following the July 30-31 FOMC meeting. Earlier this week, a pair of PMI reports confirmed that the U.S. manufacturing industry barely avoided contraction last month.

On Wednesday, the ADP Institute said private-sector employers added 102,000 workers to payrolls in June, a figure that was well below estimates.

The Department of Labor will release official employment numbers on Friday.

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