* Nasdaq, S&P 500 hit record closing highs
* Q2 U.S. GDP data better than expected
* Earnings from Alphabet, Intel, Starbucks top expectations
* Dollar hits two-month high
* Investors eye U.S.-China trade talks, Fed meeting (Updates to market close)
By Stephen Culp
NEW YORK, July 26 (Reuters) - The S&P 500 and the Nasdaq closed at record levels and the dollar reached a two-month high on Friday as strong economic data and a string of upbeat earnings reports brought buyers back to the market.
Positive quarterly results from a broad range of U.S. companies, including Google parent Alphabet Inc, Intel Corp, Starbucks Corp and McDonald's Corp helped allay disappointment over Amazon.com's miss.
U.S. economic growth slowed to a 2.1% annual rate in the second quarter, a better reading than analysts expected, driven by a jump in consumer spending, which made up for a drop in imports and a smaller inventory build-up.
"GDP growth was not fabulously good and not fabulously bad. It builds a case for the Fed to cut rates by 25 basis points and then sit on the sidelines for the remainder of this year," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
Market participants now look to the coming week, when negotiators from the U.S. and China are due to resume talks in Beijing aimed at ending the market-rattling trade war, and the Federal Reserve is expected to cut interest rates for the first time in a decade at the conclusion of their two-day monetary policy meeting.
"Anybody who's still thinking that the Fed is considering going 50 basis points next Wednesday should probably abandon that expectation," said Tom Simons, a money market economist at Jefferies in New York.
The Dow Jones Industrial Average rose 51.47 points, or 0.19%, to 27,192.45, the S&P 500 gained 22.19 points, or 0.74%, to 3,025.86 and the Nasdaq Composite added 91.67 points, or 1.11%, to 8,330.21.
A rally in large-cap stocks pushed European shares higher, as positive earnings and a surge in Vodafone Group shares spurred a recovery from Thursday's sell-off, which was driven by the European Central Bank leaving interest rates unchanged.
The pan-European STOXX 600 index rose 0.31% and MSCI's gauge of stocks across the globe gained 0.29%.
Bucking the trend, emerging-market assets slipped as investors shied away from riskier assets after ECB President Mario Draghi gave a rosier-than-expected economic outlook.
Emerging market stocks lost 0.50%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.69% lower, while Japan's Nikkei lost 0.45%.
The dollar index, which measures the greenback against other world currencies, climbed to a two-month high, marking its second straight weekly advance.
The dollar index rose 0.2%, with the euro down 0.18% to $1.1125.
The Japanese yen weakened 0.05% versus the greenback at 108.71 per dollar, while Sterling was last trading at $1.2386, down 0.55% on the day.
U.S. Treasuries were steady after yields briefly inched higher following the U.S. Commerce Department's better-than-expected GDP report.
Benchmark 10-year notes last /32 in price to yield 2.0738%, from 2.074% late on Thursday.
The 30-year bond last rose 6/32 in price to yield 2.5944%, from 2.603% late on Thursday.
Oil prices inched higher and closed up for the week as healthy economic data brightened the crude demand outlook, and as concerns persisted over the safety of oil transport around the Strait of Hormuz.
U.S. crude oil futures settled at $56.20 per barrel, up 0.32%, while Brent crude oil futures settled at $63.46 per barrel, a 0.11% advance.
Spot gold added 0.2% to $1,417.04 an ounce.
Copper lost 0.68% to $5,966.00 a tonne.
Three-month aluminum on the London Metal Exchange lost 1.07% to $1,806.50 a tonne. (Reporting by Stephen Culp; additional reporting by Amy Caren Daniel and Karen Brettell Editing by Susan Thomas)