The stock market was calm last week; volatility was at its lowest levels in over a year. Tech stocks outperformed blue chips for the second week in a row. During Friday's session, the Dow Jones Industrial Average increased 297 points, or 0.89%. The S&P 500 was up 0.77%, and the Nasdaq Composite was up 0.51%. For the week, the DJIA was up 647 points, or 1.95%, the S&P 500 was up 2.71%, and the Nasdaq Composite was up 3.12%. Year-to-date, the DJIA is up 10.44%, the S&P 500 is up 9.92%, and the Nasdaq Composite is up 7.85%.

In recent months, we talked about the potential for a major U.S. Dollar Index (USD) bottom. The greenback was close to major long-term chart support, the COT data was very favorable for the dollar (although this has reversed), and the COT data for the euro (58% of the USD) was very unfavorable. Sentiment toward the dollar was poor and sentiment toward the euro was bullish (this also reversed, with sentiment now neutral). So far, USD has bounced over 4% and has traced out a series of higher highs and higher lows.

This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.

Stocks fell on Wednesday morning as investors weighed new retail sales and producer price data, and awaited the release of minutes from the Federal Reserve's last meeting. The Commerce Department reported that U.S. retail sales rose a seasonally adjusted 5.3% in January, up from a decline of 1.0% in December and well above the Reuters consensus forecast of 1.1% growth. The Labor Department said that its producer price index rose 1.3% in January, up from 0.3% in December and the strongest gain since December 2009. The Dow fell 0.2%, the S&P 0.6%, and the Nasdaq 1.2%. Crude oil traded near $60 per barrel, while gold fell $18 to $1781 per ounce.

We have highlighted (repeatedly) the current strong market breadth, even suggesting it might be too strong and in need of a reset. We've also talked about extremely overheated market sentiment, also in need of a nice reset as we see it.

Even the arctic blast cannot cool this market, as the major indices hit all-time highs once again on Monday. The S&P 500 rose 0.7%, the Nasdaq added 0.95%, the Nasdaq 100 (QQQ) gained 0.7%, the S&P 400 MidCap (MDY) popped 1.6%, and the Russell 2000 (IWM) soared 2.5%.

The stock market rallied last week, beginning February on a strong note. Tech stocks outperformed blue chips on strong earnings from a handful of megacap technology companies. On Friday, The Dow Jones Industrial Average rose 0.30%, the S&P 500 0.39%, and the Nasdaq Composite 0.57%. For the week, the DJIA climbed 3.89%, the S&P 500 4.65%, and the Nasdaq 6.01%.

Stocks rallied strongly on Tuesday morning on signs that the Biden administration and Congressional Democrats would move forward quickly on their $1.9 trillion stimulus plan, rather than opt for a smaller plan like that proposed by Republican senators. On the earnings front, UPS shares rose after the company posted stronger-than-expected 4Q results. Investors also looked ahead to earnings from Alphabet and Amazon after the close. The Dow rose 2.0%, the S&P 1.7%, and the Nasdaq 1.4%. Crude oil traded near $55 per barrel, while gold fell $22 to $1840 per ounce.