First-Quarter Winners

Small-cap indexes continue to outpace their large-cap counterparts, though Wall Street analysts expect a reversal of this trend. The iShares Russell 2000 (IWM) was up 14.12 percent versus 4.69 percent for the SPDRs S&P 500 (SPY). Positive performance put many closely watched indexes just at or near their multi-year highs. The Nasdaq-100 (QQQQ) was ahead by 3.76 percent and the Dow Industrials as tracked by the DIAMONDS (DIA) gained 4.62 percent.

Lagging sector performers were the Utilities Select Sector SPDR (XLU), down 1.04 percent and the Semiconductor HOLDR, off by 0.87 percent. Bond ETFs struggled too, as the Federal Reserve hiked interest rates twice, putting downward pressure on bond prices. The iShares Lehman 20-Year Treasury Bond index (TLT) lost 4.80 percent and the iShares Lehman TIPS Bond index (TIP) gave up 2.11 percent.

Thirteen new exchange-traded funds were brought to market in the first quarter. Of these, the February launch of the Deutsche Bank Liquid Commodity index fund (DBC) was particularly noteworthy. It likely signals a wave of similar ETFs tracking both broad and narrow commodity segments. s," says Dan Waldron, vice president of ETF product development at First Trust Advisors.

The IPO marketplace looks strong so far in 2006. In the first quarter, the number of SEC-registered IPOs was 27 percent higher versus a year ago, according to Dealogic.

In the commodity group, the perpetual threat of higher oil prices continues to dominate the headlines. The strategy of USO is to track the U.S. crude oil benchmark also known as the spot barrel price of West Texas Intermediate light, sweet crude oil. "The fund intends to invest primarily in those futures contracts that are in the two months closest to expiration because we feel those contracts will permit the fund to best achieve its investment objective," says John Hyland, the fund's director of portfolio research. Unlike oil stocks, USO won't face the same set of risks, such as earnings, exploration and supply interruption/depletion worries.