Key U.S. and global stock markets hit new highs on Thursday due to Alphabet’s earnings boost in tech. Investors also considered the European Central Bank’s interest rate decision and the latest EU signals on trade talks with the U.S. S&P 500, Nasdaq, FTSE 100, and MSCI All Country indices reached new highs. Dow and Russell 2000 fell. Some U.S. big names saw share price declines. Oil rose over 1%, and China’s yuan strengthened against the dollar.

Artificial intelligence-related activity drove market highs on Thursday, with corporate earnings showcasing the benefits of AI investment. Businesses focusing on AI are outperforming those catering to people. Google’s parent company, Alphabet, highlighted the success of AI investments in its second-quarter results.

The ECB kept its deposit rate steady at 2.0%, awaiting clarity on trade negotiations between Brussels and Washington. U.S. economic data showed positive signs, with an acceleration in service sector activity and low jobless claims. The S&P 500 reached a record high, potentially impacting the Fed’s rate decision.

Market optimism following emerging U.S. trade deals is evident, with major indices hitting new highs. Baseline tariffs on U.S. imports are expected to be lower than initially threatened. Economists predict a final U.S. tariff rate of 15-20%, potentially impacting growth and inflation.

Despite market euphoria, the average U.S. tariff rate on imported goods could rise significantly, impacting consumers, importers, and overseas exporters. The U.S. may see decreased household spending and corporate profits as tariffs take effect over time. Equity investors seem to be overlooking these potential consequences.

Short-term market momentum is evident, with the S&P 500 closing above its 200-day moving average for an extended period. Markets are priced for near perfection, with high earnings growth expectations. The economic impact of tariffs and market expectations pose challenges for most firms, with tech giants potentially better positioned.

Tomorrow’s market-moving events include Japan and UK economic data releases, as well as U.S. durable goods and Q2 earnings reports. The interaction between protectionist trade policies and economic orthodoxy presents a significant experiment for equity investors. The ability to find positives in challenging situations continues to drive market sentiment.

Read more at Yahoo Finance: AI drives new highs