Year-end weakness was the signal from last week's Empire State report and likewise is the signal from the Philadelphia Fed's manufacturing index which fell from minus 5.9 in November to minus 10.5.

New orders are down very sharply this month for Philadelphia's sample, to minus 25.6 from plus 1.3 in what points to weakness in general activity for the opening of 2024. Unfilled orders are likewise in contraction, at minus 7.8 versus minus 9.8.

Shipments are at minus 10.8, inventories at minus 4.2, and employment at minus 1.7. Price readings show a pop higher for input costs, up more than 10 points to 25.1, with slight easing in selling prices to 13.6.

But December's results aren't depressing the sample's mood as the six-month outlook is actually brigther, up more than 14 points and back in the positive column at 12.1.

On net, however, Philly's report is not pointing to a positive start for the 2024 factory sector and extends a stubbornly negative trend for the Federal Reserve's five regional reports.

The Philadelphia Fed manufacturing index in December is expected to improve marginally to minus 3.0 versus minus 5.9 in a November report that showed little growth in new orders and a sharp fall in shipments tied to a scarcity of backlogs.

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.