The Philly Fed gives an early look at the monthly ISM data since it is released mid-month. The Philly Fed data for August comes out on the 16th (Thursday) while the August data for the national ISM numbers comes out the first week of September. The Philly Fed is VERY depressed at a reading of -12.90 and we often see big snapback rallies in the Philly Fed after plunges just like in 2010 and 2011. Please note that the summer trading range in the S&P 500 was broken BECAUSE of the Philly Fed going from a negative 17.5 to a positive 8.7 for October when it was released on 10/20/2011.
Besides the Philly Fed’s tendency to snapback after very low readings, there is fundamental support to expect a much improved reading in the headline index, which is the recent easing in inflationary pressures. In an era of zero-interest-rate-policy (ZIRP), short-term interest rates are not the primary driving force of the business cycle but rather inflation (as detailed by Francois Trahan, Head of Portfolio Strategy and Quantitative Research at Wolfe Trahan and explained in his recent book).
Based on the Prices Paid component of the Philly Fed which leads the headline component, we should see the Philly Fed rally strongly into yearend as past easing in inflationary pressures acts as stimulant heading into year-end.