The Philadelphia Fed manufacturing index, at minus 7 in August, ended six months of solidly positive readings though key details remain positive though markedly less positive than July. New orders did slow by more than 6 points but remain very healthy at 14.6, similarly for unfilled orders which slowed by nearly 6 points but remain positive at 3.2. Shipments fell back more than 20 points but also remain in the positive column at 8.5.

Employment and the workweek, however, are in negative ground at minus 5.7 and minus 2.3, respectively. Price data this month are also unfavorable, showing increasing pressures for costs (24.0 from 19.8) and decreasing pricing power for selling prices (13.7 from 24.2). No wonder then that the general 6-month outlook has soured, to 15.4 which is weak for this reading and down more than 20 points from July.

The Empire State manufacturing index also released this morning at 8:30 a.m. ET likewise posted in the negative zone, at minus 4.7. Together these reports may have forecasters holding down their estimates for the August ISM manufacturing index, a report that has been stuck in negative ground for the past four reports. However much the consumer has been showing life, the manufacturing sector may be sputtering going into year end.

The Philadelphia Fed manufacturing index in August is expected to slow to 5.8 from July's 13.9. Many readings in July's report, including new orders, posted multi-year highs.

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.