The US Philadelphia Fed manufacturing general business conditions index took a surprising step back to minus 5.5 in November from 10.3 in October after September's marginally positive 1.7. Forecasters were caught off guard by the return to contraction in November as consensus expectations called for a positive reading at 7.0, with a range of 0 to 11.0.

Even as general business conditions were seen in contraction, most current sub-indexes remained somewhat positive. The key forward-looking one, new orders, only eased to 8.9 in November from 14.2 in October. Shipments were at 4.5 versus 7.4, and employment, everyone's focus, turned positive at 8.6 versus minus 2.2. On the current pricing front, the prices paid sub-index was pretty steady at 26.6 versus 29.7 while prices received were at 14.3 versus 17.9.

The six-month outlook for general business conditions was remarkably buoyant at 56.6 in November versus an already upbeat 36.7 in October.

After a big jump in current conditions to 10.3 in October from 1.7 in September, forecasters expect a slight retreat to a still expansionary 7.0 in November.

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.