Morning Call Sheet: Markets near highs as AI drives rally and risks linger

• The AI narrative is seen as justifying current market highs, though from a narrow basis, with upcoming 'Magnificent 7' earnings crucial for validation.
• China is reportedly planning to restrict U.S. investment in its tech firms, including AI pioneers, a move viewed as a reciprocal response to U.S. actions.
• The Fed is expected to hold interest rates, but any commentary on inflation measures and geopolitical events will be closely watched.
• Analysts remain bullish on U.S. tech, particularly AI, believing the sector is still in the early stages of a significant growth cycle.

Financial markets are near record highs, primarily driven by the artificial intelligence (AI) narrative. Upcoming 'Magnificent 7' tech earnings are a key test for this rally, while geopolitical tensions, specifically China's reported move to curb U.S. investment in its tech firms, and the Federal Reserve's stance on interest rates, present significant risks and potential market drivers.