The index is up to minus 4.0 in May from minus 26.4 in April, topping expectations for minus 10.0, suggesting some resilience in manufacturing. The May reading shows only a minor contraction, far from the disastrous drop that many feared would flow from uncertainty around tariffs.

New orders perks up to 7.5 in May from minus 34.2 in April and close to 8.7 in March. And employment rises to 16.5 in May from 0.2 in April. Shipments is a downer at minus 13.0 versus minus 9.1, and prices paid are soaring at 59.8 in May versus 51.0 in April.

So the tariff shock in May seems to be showing up more on the pricing front than the business activity front.

The Philly Fed index is expected to correct upward but remain in contraction at minus 10.0 in May after plunging to minus 26.4 in April.

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.