As oil plunged, the markets embraced the Fed's pause, technology stocks and a strong U.S. economy to end the week on high note.

The Dow Jones Industrial Average made a second all-time high of the week Friday on the heels of stronger-than-expected retail sales report for December. The index finished the week up 1.3% to close at 12,556.08 on Friday. The S&P 500 closed up 1.5% for the week at 1430.73, a new six-year high. But the Nasdaq Composite had the most dramatic rise, climbing 2.8% in first full week of the year to a new six-year high.

Investors fell back in love with technology, as Apple Computer's ( AAPL) new iPhone symbolized high hopes for the sector. Cisco Systems ( CSCO) and the options backdating scandal interrupted the party. Cisco decided to sue Apple for trademark infringement, and the Washington Post and Wall Street Journal reported that federal regulators are investigating a 2001 options grant to CEO Steve Jobs.

Those issues, and profit-taking after a big run, weighed on Apple on Thursday and Friday, but the shares still rose 11.3% this week.

The bulls were further enthused by a strong start to earnings season with stronger-than-expected results and/or guidance from Alcoa ( AA), Genentech ( DNA) and Sears Holdings ( SHLD), most notably.

Meanwhile, the unwinding of last year's window-dressing continued. "Sectors that had been the strongest in 2006 and chased at year-end posted the worst results (energy, telecom, materials)," writes Brian Belski, U.S. sector strategist at Merrill Lynch. "Traditionally 'growthier' areas (discretionary, tech) outpaced deep cyclicals."

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