The S&P 500 and Nasdaq closed at fresh record highs Thursday, lifted by renewed optimism over trade negotiations and a strong earnings-driven rally in Alphabet.

At the close of trading (NYSE: AEO), the Dow Jones Industrial Average dropped 316 points, or 0.7%, while the S&P 500 edged up 0.1%, and the Nasdaq Composite rose 0.2%.

Alphabet Powers Tech Gains

Alphabet (NYSE: AEO) was a standout performer after delivering better-than-expected second-quarter earnings. The Google parent cited robust demand for its cloud services and raised its 2025 capital expenditure forecast to $85 billion from $75 billion, with further increases projected in 2026.

UBS analysts noted that the results show Alphabet is “generating enough leverage to offset the ongoing GenAI infrastructure build,” reinforcing its competitive advantage.

So far, about a quarter of S&P 500 companies have reported second-quarter results. Of those, 67% have exceeded revenue expectations and 88% have topped earnings per share forecasts, underscoring a broadly solid earnings season.

Mixed Results Elsewhere

• Tesla (NYSE: AEO) shares dropped after CEO Elon Musk warned of “a few rough quarters” ahead, following a disappointing Q2 performance.
• IBM (NYSE: AEO) fell as the tech giant’s software revenue came in below analyst forecasts.
• UnitedHealth (NYSE: AEO) also declined after revealing it is under a Department of Justice investigation related to its Medicare program participation.
• Dow Inc. (NYSE: AEO) slumped after posting a larger-than-expected loss and cutting its dividend in half amid ongoing industry weakness.
• Chipotle (NYSE: AEO) tumbled as soft consumer spending contributed to a steeper-than-expected drop in quarterly sales, prompting a downward revision to its full-year guidance.
• On a brighter note, American Eagle Outfitters (NYSE: AEO) surged after launching a new denim campaign featuring actress Sydney Sweeney, aimed at reconnecting with Gen Z consumers.

Trade Optimism Supports Sentiment

Investor confidence was further supported by a Financial Times report suggesting the U.S. and European Union are moving closer to a trade agreement, which would establish a baseline 15% tariff on goods from the EU. This follows a recent trade pact with Japan and helps reduce uncertainty tied to former President Trump’s looming August 1 deadline for reciprocal tariffs.

Economic Data

Separately, labor market data showed initial U.S. jobless claims fell slightly last week, suggesting continued resilience in the job market even as broader macroeconomic risks persist.

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