The Empire index popped up somewhat more than expected to 5.7 in February from minus 12.6 in January. That compares with a modestly positive 0.5 index anticipated in the Econoday consensus.

New orders and shipments showed moderate growth to pace the uptick. New orders, the forward-looking index, improved to 11.4 from minus 8.6. Shipments rose to 14.2 from minus 1.7. Delivery times rose to 5.4 from 3.5 and supply availability fell to minus 2.2 from 0.0.

On a slightly discordant note, employment dipped to minus 3.6 from 1.2. Plus, price pressure accelerated with prices paid jumping to an elevated 40.2 from 29.1. Prices received rose to 19.6 from 9.3.

There was also a notable decline in six-month expectations to 22.2 from 36.7 the prior month, but it remains solidly positive.

The Empire manufacturing index is expected to improve marginally to minus 0.5 in February after dropping to minus 12.6 in January from 2.1 in December.

The New York Fed conducts this monthly survey of manufacturers in New York State. Participants from across the state represent a variety of industries. On the first of each month, the same pool of roughly 200 manufacturing executives (usually the CEO or the president) is sent a questionnaire to report the change in an assortment of indicators from the previous month. Respondents also give their views about the likely direction of these same indicators six months ahead.

Investors track economic data like the Empire State Manufacturing Survey to understand the economic backdrop for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers a moderate growth environment that won't generate inflationary pressures. The Empire Manufacturing Survey gives a detailed look at New York state's 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 the markets. Some of the Empire State Survey sub-indexes also provide insight on commodity prices and other clues on inflation. The Federal Reserve closely watches this report because when inflation signals are flashing, policymakers can reset the direction of interest rates. As a consequence, the bond market can be highly sensitive to this report. The equity market is also sensitive to this report because it is the first clue on the nation's manufacturing sector, reported in advance of the Philadelphia Fed's business outlook survey.