Philadelphia Fed manufacturing stages a surprising rebound with the index at 15.9, up from minus 4.0 in June and in May. Consensus expectations looked for a minus 0.4 figure. The positive reading indicates a resumption in growth in July after three straight months of contraction, with the index at its highest since February.

The rise reflects improvement in new orders at 18.4 in July versus 2.3 in June and shipments at 23.7 versus 8.3 in June. Inflation pressures spoil the party somewhat. Prices paid rises to 58.8 from 41.4 and prices received gain to 34.8 from 29.5.

Six-month business expectations improve to 21.5 from 18.3.

The manufacturing barometer is expected at -0.4 in July versus minus 4.0 in June.

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.