The Dow industrials, whose 30 component stocks are selected by the editors of The Wall Street Journal, went through a face-lift on Nov 1, 1999. Four strong new stocks, Microsoft, Intel, Home Depot and SBC Communications, a dynamic Baby Bell, replaced four underachievers - Chevron, Goodyear Tire, Sears Roebuck and Union Carbide (the last of which later was acquired by Dow Chemical).

Microsoft and Intel, in fact, were the first two Nasdaq-traded stocks ever to become members of the industrial average. What has happened since the switch isn't exactly what you would have expected: the four stocks of the future are doing worse than the four stocks of the past.

It isn't that the four old stocks have soared since leaving the industrial average. They haven't. But three of the four (all but Dow Chemical) are up so far this year. And two, Sears and Chevron, are up since being removed from the average.

That is a lot better than the four replacements have done. None is up since it joined the industrials and only one, Microsoft, is up so far this year. They initially flourished after joining the Dow industrials, and gave the average itself a New-Economy boost, but all four new stocks got hit during the tech-stock collapse. As of Friday's close, a calculation of the "old" Dow, done on a theoretical basis that assumes the four old stocks had been retained, would have been 10792.05, 147.43 points ahead of the actual Dow, which was at 10644.62.

That is what is happening across the stock market: The ugly ducklings are having their day. The point isn't that Sears has become a better company than Microsoft. The point is that something that had been ignored by investors for more than a year has become important again, perhaps lastingly: valuation.

Sears, in other words, was merely better-priced than Microsoft. Last week's stock market was another shattering example of investors putting this math to work. After posting a 5 per cent gain for the first three days, the tech-loaded Nasdaq Composite Index crumbled under the weight of warnings about coming sub par performance from the likes of JDS Uniphase, Yahoo! and Intel. After a 5.35 per cent drop on Friday - the first anniversary of the index's record close above 5000 - the Nasdaq composite finished the week down 3.1%, at 2052.78, its lowest point since late 1998.

But the industrial average, which despite its New-Economy injection is still dominated by more-established industrial stocks, held up better. Down 1.97 per cent, or 213.63 points, on Friday, the blue chips finished the week up 1.7 per cent, or 178.31 points, at 10644.62. The Standard & Poor's 500-stock index, which fell 2.48 per cent on Friday, ended the week at 1233.42, down 19.25 per cent from its record close and within a hair of a bear market, defined as a 20 per cent drop from a high.

-- The Wall Street Journal