The Dallas Fed's manufacturing survey showed the contraction in business activity deepened in March with the general activity index registering minus 14.4 in March versus minus 11.3 in February and minus 27.4 in January.

Details in the Dallas report included new orders at minus 11.8 in March versus 5.2 in February and minus 12.5 in January. Production came in at minus 4 in March versus 1.0 in February and 15.4 in January. Shipments registered minus 15.4 in March versus 0.1 in February and minus 16.6 in January.

Employment came in at 1.5 in March versus 5.9 in February and minus 9.7 in January. Hours worked registered minus 7.9 versus minus 7.0 in February versus 11.8 in January.

Prices paid for raw materials were 21.1 in March versus 15.4 in February and 20.2 in January. Prices received were 11.0 in March versus 0.8 in February and 0.1 in January.

On the six-month outlook, general business conditions registered 1.3 in March versus 6.2 in February and minus 10.4 in January. The six-month outlook for new orders was 23.7 in March versus 24.2 in February and 20.9 in January.

The activity index is expected to extend its long contraction, at a consensus 10.5 minus in March versus minus 11.3 in February.

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.