The Philadelphia Fed manufacturing index staged a stunning rebound to 44.3 in January from a revised minus 10.9 in December as new orders, shipments and employment improved. Expectations for January called for a minus 7.0 figure! The January index was the highest since April 2021 and its one-month increase was the largest since June 2020.

New orders surged 47 points to 42.9, its highest reading since November 2021. Shipments jumped 39 points to 41.0, its highest since October 2020.

Forecasters expect the Philly Fed index to remain in contraction at minus 7.0 in January but a bit better than minus 16.4 in December.

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.