The Dallas Fed's manufacturing index showed business activity remained in contractionary territory in June after a somewhat steeper decline in May. The general activity index registered minus 23.2 in June versus minus 29.1 in May and minus 23.4 in April.

The June report showed the 14th straight negative result for this index. The June figure compared with the Econoday consensus expectation of minus 26.5.

Price pressures were notably lower in June though wage pressures remained elevated. Prices paid for raw materials dropped to 1.4 in June from 13.8 in May and 19.5 in April. Prices received registered minus 1.9 in June versus 0.4 in May and 8.4 in April. Wages and benefits remained relatively high at 25.3 in June versus 25.0 in May.

Other details in the Dallas report included new orders at minus 16.6 in June versus minus 16.1 in May and minus 9.6 in April. Production eased to minus 4.2 in June from minus 1.3 in May and 0.9 in April. Shipments were at minus 17.0 in June versus minus 3.0 in May and minus 2.8 in April.

Employment eased to 2.2 in June from 9.6 in May and 8.0 in April. Hours worked were at minus 4.3 in June versus minus 0.9 in May and minus 2.7 in April.

On the six-month outlook, general business conditions registered minus 4.5 in June versus minus 12.7 in May and minus 16.6 in April. The six-month outlook for new orders was 17.0 in June versus 3.7 in May and 7.7 in April.

The activity index is expected to post a 14th straight negative score, at a consensus minus 26.5 in June versus minus 29.1 in May which, for a third month in a row, was much deeper than expected.

The Dallas Fed Manufacturing Survey tracks factory activity in Texas on a monthly basis. Firms are asked whether output, employment, orders, prices and other indicators increased, decreased or remained unchanged over the previous month. Responses are aggregated into balance indexes where positive values generally indicate growth while negative values generally indicate contraction. About 100 manufacturers regularly participate in the survey.

Investors track economic data like the Dallas Fed Manufacturing Survey to understand the economic backdrop for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a moderate growth environment that will not generate inflationary pressures. The Dallas Survey gives a detailed look at Texas' manufacturing sector, how busy it is and where it is headed. Since manufacturing is a major sector of the economy, this report can have a big influence on the markets. Some of the survey indexes also provide insight on inflation pressures -- including prices paid, prices received, wages & benefits, and capacity utilization. The Federal Reserve closely watches this report because when inflation signals are flashing, policymakers can reset the direction of interest rates. As a consequence, the bond market can be highly sensitive to this report. The equity market is also sensitive to this report because it is an early clue on the nation's manufacturing sector, reported in advance of the ISM manufacturing index and often in advance of the NAPM-Chicago index.