The word "instead" is used as a conjunctive adverb in the given sentence. It is a special type of adverb.
A conjunctive adverb is used to link independent clauses or sentences. It is a special type of adverb.
Thus, "The weather report predicted a severe thunderstorm in the afternoon; instead, the day was beautiful and sunny" the word "instead" is used as a conjunctive adverb.
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