In a much weaker than expected showing, the Philly Fed index plunged by a whopping 39 points to minus 26.4 in April, its lowest reading since April 2023. That is down from 12.5 in March, and a huge miss compared with the expected 6.7.

New orders, the forward-looking component, dropped to minus 34.2 in April from 8.7 in March to reach its lowest since April 2020, during the pandemic. Shipments were negative at minus 9.1 versus 2.0, and employment was at 0.2, effectively flat, down from 19.7 in March.

Price pressures picked up in the face of slowing business activity. The prices paid figure rose to 51.0 from 48.3, its highest reading since July 2022. Prices received rose to 30.7 from 29.8.

The 6-month outlook index edged up to 6.9 from 5.6, and the 6-month capex fell to 2.0 from 13.4. The outlook figures suggest"subdued" growth expectations, the Philly Fed said.

The report does not include survey respondent comments but the result smacks of tariff effects with customer demand dropping and business capex down, with price pressures rising.

The index, an early read on manufacturing for April, is expected at 6.7 from 12.5 in March and 18.1 in February. Presumably the tariff chaos makes for a downside risk.

The general conditions index from this business outlook survey is a diffusion index of manufacturing conditions within the Philadelphia Federal Reserve district. This survey, widely followed as an indicator of manufacturing sector trends, is correlated with the ISM manufacturing index and the index of industrial production.

Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. By tracking economic data such as the Philly Fed survey, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth so that it won't lead to inflation. The Philly Fed survey gives a detailed look at the manufacturing sector, how busy it is and where things are headed. Since manufacturing is a major sector of the economy, this report has a big influence on market behavior. Some of the Philly Fed sub-indexes also provide insight on commodity prices and other clues on inflation. The bond market is highly sensitive to this report because it is released early in the month and is available before other important indicators.