The Dallas Fed's manufacturing index showed business activity remained in contractionary territory in July after steeper declines in May and June. The general activity index registered minus 20.0 in July versus minus 23.2 in June and minus 29.1 in May.

The June report showed the 15th straight negative result for the business activity index. The June figure compared with the Econoday consensus expectation of minus 22.5.

Price pressures ticked up but remained subdued in July. Prices paid for raw materials rose to 10.5 in July from 1.4 in June and 13.8 in May. Prices paid remained well below its average reading of 27.6. Prices received registered 2.3 in July versus minus 1.9 in June and 0.4 in May. Wages and benefits came in at 19.1 in July versus 25.3 in June and 25.0 in May.

Other details in the Dallas report included new orders at minus 18.1 in July versus minus 16.6 in June and minus 16.1 in May Production eased to minus 4.8 in July from minus 4.2 in June and from minus 1.3 in May. Shipments were at minus 2.2 in July versus minus 17.0 in June and minus 3.0 in May.

Employment rose to 10.0 in July from 2.2 in June and 9.6 in May. Hours worked rose to 3.9 from minus 4.3 in June and minus 0.9 in May.

On the six-month outlook, general business conditions rose to 4.6 in July from minus 4.5 in June and minus 12.7 in May. The six-month outlook for new orders was 19.7 in July versus 17.0 in June and 3.7 in May.

The activity index is expected to post a 15th straight negative score, at a consensus minus 22.5 in July versus minus 23.2 in June.

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.