The Philadelphia Fed manufacturing index recovered into marginal growth territory in September after contracting in August. The underlying details are mixed, with a notable improvement in employment lifting the overall result while new orders fell back.

The manufacturing index rose to 1.7 from minus 7.0 in August, but the forward-looking new orders component eased to minus 1.5 from a relatively healthy 14.6 in August. The September result nearly matched expectations for 2.0.

Employment, the one to watch these days, rebounded to 10.7 from minus 5.7 in August but its companion, workweek, dropped to minus 13.6 from minus 2.3 in August.

Prices received, the barometer of pricing power, rose to 24.6 from 13.7 and prices paid rose to 34.0 from 24.0, which suggested upward pressure on commodities prices.

The Philadelphia Fed manufacturing index in September is expected rebound to plus 2.0 versus August's minus 7.0 which ended six months of positive scores. Both new orders and unfilled orders held in positive ground in August.

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.