By David Randall

NEW YORK (Reuters) - Expectations of more Federal Reserve tightening and economic worries are weighing on a rebound in consumer discretionary stocks, though some investors believe the sector will outperform other areas of the market if growth begins to wobble in coming months.

The S&P 500’s consumer discretionary sector, a group of companies ranging from Amazon.com Inc and Tesla Inc to discount retailer TJX Companies Inc, is up 14.3% for the quarter to date following a pummeling when it lost nearly 35% in the first half of the year.

The broader S&P 500, by comparison, is up just 1.9% for the quarter, after a summer rally crumbled on worries the Fed will tighten rates at a faster clip than previously anticipated. The index is down 19.1% this year.

The gains in the consumer discretionary sector may prove fleeting. Shares of Ford fell nearly 12% on Tuesday after the automaker flagged a bigger-than-expected $1 billion hit from inflation, echoing warnings from sector constituents like Walmart and Target earlier in the year. The sector has fallen some 10% from its recent mid-August highs.

Still, some investors believe inflation and growth woes may already be largely reflected in many consumer discretionary shares. At the same time, they are betting these stocks can continue to benefit as consumers make purchases ranging from cruise tickets to new cars that they delayed early in the pandemic, said Randy Frederick, managing direction for trading and derivatives at Charles Schwab.

Eric Marshall, a portfolio manager at Hodges Capital, has been adding to positions in consumer discretionary stocks including retailer Academy Sports and Outdoors Inc, which is up 32.6% for the quarter, and Shoe Carnival Inc, which is up 0.4% for the quarter.

"It's not even a question as to whether there's going to be a recession, but how severe it will be and for how long it will last," he said. "But we're seeing a lot of consumer stocks that we think will hold up and come out of this in a better position."

Bets that consumer spending on non-essential items such as vacations, coffee and automobiles will stay comparatively strong even if the Fed's battle against inflation hurts growth have helped drive the sector's gains in recent months.

Amazon.com and Tesla, which together make up about 50% of the sector's weighting, are up 15% and 37.5% respectively for the quarter, fueling much of its performance. Many smaller constituents have also outperformed, including shares of General Motors Co and Chipotle Mexican Grill Inc, which are up nearly 30% over the same time.