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The close: TSX higher as natural resource stocks gain, Dow zooms 205 points

A man walks past an old Toronto Stock Exchange (TSX) sign in Toronto, June 23, 201

Mark Blin/Reute

Canada's main stock index ended higher on Thursday, as gains for energy companies and miners offset falls among marijuana producers and in Shaw Communications Inc, whose earnings disappointed.

The Toronto Stock Exchange's S&P/TSX composite index unofficially closed up 38.99 points, or 0.24 per cent, at 16,286.94.

The most influential weights on the index included Shaw Communications, which fell 2.8 per cent to $27.16 after reporting quarterly earnings that missed expectations.

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Marijuana producers, a volatile but broadly rising sector, also weighed, with Aphria Inc down 9 per cent at $20.55 and Canopy Growth Corp off 10.4 per cent at $37.56. Aurora Cannabis Inc. dropped 8.18 per cent to $12.24.

Elsewhere, Yamana Gold Inc. was up 4.75 per cent to $4.19, while Crescent Point Energy jumped 4.02 per cent to $11.38.  Bombardier Inc. rose 1.01 per cent to $3.00.

Wall Street closed at record highs on Thursday as rising oil prices lifted energy stocks and investors bet on a strong U.S. corporate earnings season.

The S&P energy sector closed up 2 per cent as Brent crude went above $70 a barrel for the first time since December 2014, boosted by a surprise drop in U.S. production and lower crude inventories.

The consumer discretionary sector saw strong gains in media and retail stocks, while the industrials index was helped by airlines after news from No. 2 U.S. carrier Delta Air Lines.

"The unifying factor of today's move and this whole week is a heightened confidence in the pace of economic activity. That helps explain the demand picture, which has oil up at $70," said Scott Clemons, chief investment strategist at Brown Brothers Harriman in New York.

The Dow Jones Industrial Average rose 205.6 points, or 0.81 per cent, to 25,574.73, the S&P 500 gained 19.33 points, or 0.70 per cent, to 2,767.56 and the Nasdaq Composite added 58.21 points, or 0.81 per cent, to 7,211.78.

Wall Street had dropped on Wednesday, the first daily decline for S&P and Nasdaq in 2018, after a report China would slow U.S. government bond purchases and a report that U.S. President Donald Trump would end a key trade agreement.

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The major indexes pared gains briefly in late afternoon trading on Thursday after New York Fed President William Dudley said tax cuts could lead to economic overheating. He predicted above-trend GDP growth with rising inflation in 2018.

"Dudley is touching on something that investors should fear," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. "The only threat to the stock market right now is high interest rates. If rates are higher, the present value of equities are too high."

Investors are betting on bullish quarterly earnings reports from big companies and details on savings from federal tax cuts. The reporting season kicks off in earnest on Friday, with results from the big U.S. banks JPMorgan Chase & Co and Wells Fargo & Co.

Earnings for S&P 500 companies are expected to have increased by 11.8 percent in the recently-ended quarter, with the biggest gain from the energy sector, according to Thomson Reuters I/B/E/S.

"This market feels this week like a deep breath before the onslaught of earnings reports," Clemons said. "This is a wait-and-see mode with a healthy amount of optimism."

Delta Air Lines shares closed up 4.8 per cent at $58.52 after it predicted a double benefit from the U.S. corporate tax cut - savings on its own bill and an uptick in business travel as companies to spend tax savings. It also reported an upbeat quarterly profit.

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Delta helped the Dow Jones U.S. Airlines index close up 4.2 per cent. The Dow Jones Transport index rose 2.3 per cent - its biggest one-day percentage gain since Nov. 29.

Oil prices retreated from big gains on Thursday, but still managed to settle at three-year highs after the global Brent benchmark hit $70 a barrel on signs of tightening supply in the United States.Brent crude futures settled 6 cents higher at $69.26 a barrel, after hitting $70.05 a barrel during the session, its highest level since November 2014. Brent's settlement still represents a three-year closing high.

Brent has gained 5 percent since the beginning of the year, picking up from its late-year surge.

U.S. West Texas Intermediate (WTI) crude futures settled at $63.80 a barrel, up 23 cents, the highest since December 2014.

Prices came off highs after an early surge that took benchmarks past key resistance levels that produced a flurry of buying in an active day in the market. However, analysts said it would take more than one day to convincingly break through $70 a barrel on Brent.

"The propulsion of the upside was due to short-covering and no buying," said Marty Wallace, broker for LLC in Chicago.

The relative strength index (RSI), which measures the speed and breadth of a rally, shows oil in an overbought condition, suggesting the move has come too far, too fast.

"You have a very overbought market. Oil is acting like an internet stock and when it does that you know it's getting overcooked," said Walter Zimmerman, chief technical analyst for United-ICAP.

Oil has been in an upward trend thanks to a steady, pronounced drop in global supply, particularly in the United States, the world's largest consumer.

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