FDN), which is down only 4% over the same period. Earnings season hasn't been particularly positive for the consumer sector. The large gains and positive outlooks have mostly stemmed from international and business spending. Intel ( INTC) reported its best quarterly earnings in company history thanks to businesses making long delayed capital investments. Marriott ( MAR) reported solid earnings as business and leisure travelers come back in North America, although it was business travelers providing the boost. According to the president and COO of Marriott, leisure travel has not picked up as much as business travel, and since the summer season tends to be heavy on vacations, the next quarter will be challenging. While this doesn't detract from Marriott's strong report, it does illuminate weakness in the consumer sector. Yum Brands ( YUM) delivered a similar story, with concerns about U.S. unemployment and cautious consumerism. It too reported good results, but rising wages in China added to concerns about domestic consumption, which led investors to punish the stock. Some better performing stocks report earnings later this week, notably Netflix ( NFLX) and Amazon ( AMZN). These companies are doing well by catering to the portion of the consumer market that is performing well -- discount. Meanwhile, discount retailers such as Dollar Tree ( DLTR), Dollar General ( DG) and Wal-Mart ( WMT)have been outperforming the retail group as consumers batten the hatches and restrict discretionary spending. Curiously, companies such as Amazon and Netflix don't spring to mind when consumers think of discount. However, these corporations benefit from changing consumption patterns and often compete on price. For Amazon, consumers turn to online comparison shopping as a means to save money; as more consumers migrate online, more sales will take place electronically. Even with little growth in total consumption, online retailers are likely to see growing sales.
Amazon has also created a new market for online books through its Kindle reader. Consumers who use the Kindle can pay less for the same books and the company reported that sales of digital books surpassed those of hardcover books for the first time in the previous three months. Netflix, also benefiting from shifting consumer trends, has created a new market with flat-rate pricing for movie rentals, and has recently taken it a step further by offering movie streams online. Netflix-ready TVs and devices allow customers to easily stream movies to their living room. gSome consumers have also decided that Netflix's monthly cost is lower than their cable bill, and with lots of TV shows available in the company's library, have substituted one for the other. The consumer discretionary ETFs not only have exposure to discount retailers and online consumer discretionary companies but also cover the broader retail industry. This has been a hindrance for XRT and FXD as consumers have not returned to their pre-recession consumption patterns. For FDN, however, the story is different. The fund holds 7% of assets in Amazon and 3% in Netflix. It also has 5% in eBay ( EBAY) and almost 3% in Expedia ( EXPE). The latter firm reports earnings next week and it will be interesting to see how their outlook differs from Marriott on leisure travelers. Besides holding Internet consumer discretionary companies, FDN also holds the backbone and service companies of the Internet, such as Juniper Networks ( JNPR), Akamai ( AKAM) and Verisign ( VRSN). As business spending picks up first, these companies are likely to see improvement as well. -- Written by Don Dion in Williamstown, Mass.