Stock market index performance was mixed for the first quarter of this year, and has gotten more mixed since! The Dow was down 5%, the NYSE (a good "Old Economy" gauge) was flat, and the S&P 500 was up 2%. The big winner was the Nasdaq, up 12%, and the Russell 2000, up 7%. The first week of this quarter wiped out most of the Nasdaq's gain as techs got hammered, especially net stocks. The Microsoft mess was enough to zap a market nervous about extremely high tech stock valuations.

This may signal the end of the dot.com bubble. As I told you several months ago, venture capital investors started scrutinizing tech start-ups much more closely. The spigot has been turned off for many fledgling techs. A good example is e-tailers. 30,000 companies sell stuff on the net, but only 1,000 have sales of more than $500,000 per year. Investors have finally realized that it is extremely difficult to make money retailing on the net. Everything militates against profitability: dominance of some product lines by big companies with deep pockets; the commodity nature of many goods (books, CDs, toys) where price becomes the focus of competition; search engines that will find the site with the lowest price for shoppers. So now investors are actually asking when and where profits will be made in the future, and shunning the firms that have no such prospects.

Stock mutual funds did rather well in the first quarter. The average US stock fund returned 5.4%. Science & technology funds, mid- and small-cap growth funds, health & biotech, and telecom funds all had double digit returns. Another notable occurence was that several very well-known hedge fund and mutual fund value managers gave up the ghost and "retired" during the quarter.