The Philadelphia Fed manufacturing index posted its fifth straight plus reading, but just barely at 1.3 for June. A reading so close to zero indicates only the most marginal upward shift in general sentiment compared to May.

One key for the sample's caution is weakness in new orders which did rise by nearly 6 points in June but is still in the negative column at minus 2.2. Unfilled orders, however, did move into the plus column at 8.9 for a more than 20 point jump from May. But this is by far the most favorable reading in June's report which otherwise shows increasing contraction in shipments (at minus 7.2), continued though modest contraction in employment (minus 2.5) and rising inflation pressures for both prices paid, up nearly 4 points to 22.5, and prices received, up more than 7 points to 13.7.

A negative in the report is a steep downgrade in general 6-month expectations which are still in the plus column at 13.8 but down substantially from May's 32.4. Hawkish jawboning from Federal Reserve officials, who are still concerned about lack of progress on the inflation front, are perhaps behind the sample's weakening optimism.

The Philadelphia Fed manufacturing index in June is expected to hold steady at 5.2 versus May's 4.5 which was the fourth reading in a row in the plus column.

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.