Last week's sector focus was on consumer staples while this week we'll focus on the consumer discretionary sector. At the end of the day, these sectors are just fancy names for goods and services many of us use every day. As I mentioned last week, staples are the products consumers won't do without in any economy. Discretionary stocks are more cyclical or seasonal. The key drivers in this sector are 1) consumer spending and 2) interest rates. If the economy is booming, chances are stocks in the consumer discretionary sector are too.

There is a very strong inverse correlation between interest rates and the sector's price and performance, relative to the S&P 500. For example, low interest rates fuel mortgage refinancing and durable goods spending. Moreover, lower interest rates discourage saving and encourage spending. With current interest rates at a 30-year low in the States, it's no wonder this sector has done so well (as shown below).

Consumer Discretionary as a group, is one of the largest among the S&P 500 and makes up 11.24 percent, or 56 companies, of the 500 largest companies. Basically, the sector can be divided into seven segments: General Merchandising (24 percent), Retailing (24 percent), Movies and Entertainment (16 percent), Media (12 percent), Consumer Durables and Apparel (eight percent), Hotel Restaurants & Leisure (eight percent) and finally Auto Components (eight percent).

Below are two companies and one exchange traded fund (ETF) that fall into the consumer discretionary category:

Similar to the bundled ETF for the S&P 500, commonly known as SPDR's, the Select Sector are an unbundled version of the spider's and focus solely on Consumer Discretionary stocks. Exchange traded funds are a great way to get started in investing. They are bought and sold like individual stocks, but actually consist of 86 consumer discretionary components of the S&P 500. Moreover, buying one XLY share is much more cost effective then buying 86 individual stocks. The XLY's are some of the cheapest ETF's available with total fees just 0.28 percent. Performance wise, XLY's annualised three-year returns are 4.6 percent versus the S&P 500's negative -10.13 percent. However, one year returns for the S&P 500 are 24.40%, outpacing the XLY's by some two percentage points. XLY's top 5 holdings include: Home Depot Inc, Comcast Corp., AOL Time Warner Inc, Viacom Inc, and Walt Disney Co.

Fortune Brands Inc. makes everything from whiskey to golf balls. The Illinois based conglomerate released earnings on Thursday and said quarterly profit rose 29 percent, driving its stock to an all-time high, as double-digit gains in sales of Jim Beam bourbon, Titleist golf equipment and cabinets lifted results. The maker of a wide-range of products from office supplies to alcoholic beverages posted net profit of $146.1 million, or 98 cents a share in the third quarter, up from $113.2 million or 73 cents a share, a year ago. Excluding one-time items, profit was $1 a share in the quarter. Analysts on average forecast profit of 92 cents a share. Sales rose 8.2 percent to $1.58 billion as all the company's business segments performed at or above expectations. One pleasant surprise the company noted was the golf business, in which the company's sales rose 16.4 percent and profit rose 28.6 percent even though rainy weather and hurricanes cut into rounds played for the golf industry.

Legendary motorcycle maker Harley-Davidson Inc. recently made headlines when it finished off a 14-month long party in Milwaukee to celebrate it's 100th Anniversary. Most of us know the name, the brand, and most of all ‘the HOG'.

We also tend to associate Harley-Davidson with big, tattooed, leather-clad biker gangs, not the multi-billion dollar global public corporation it has evolved into. Who knew, 100 years later, Harleys would become so popular that they can't even keep up with demand? Moreover, that Hell's Angels clubs and affluent baby-boomers alike would be lining up to fork out more than $20,000 for a thundering piece of American steel.

Nonetheless, despite their most impressive Q3 numbers complete with record profits, clouds loom on the horizon. The company cited slightly weaker sales (when compares to Q3 -2002) and issued a disappointing 2004 production target. Analysts feel this negative news will pressure the stock over the short term but are quick to point out that 2003 sales were unique in that company sold a disproportionate amount of “100th Anniversary” bikes and thus a lower 2004 forecasts by the company was to be expected.