Under-the-radar report next week could be crucial for the market

The Federal Reserve Bank of New York is set to publish its monthly survey of New York State manufacturers on Monday, and the economic report could serve as an important bellwether for the economy and the stock market.

The Empire State Manufacturing Survey data is due out Monday before the market opens, and economists surveyed by FactSet are forecasting a month-over-month decline. The shipments and inventories measured in the survey often serve as a marker for the health of the manufacturing landscape, as well as economic activity.

Soft data would spell a "sell" signal for the market, and an opportunity for investors to begin paring back their positions "at valuations that are still reasonably high," said Gina Sanchez, Chantico Global CEO. She said Friday on CNBC's "Trading Nation" that this could prove to be an opportunity to "sell the S&P 500 on soft data, or buy the S&P 500 on solid data."

She is expecting to see positive results, and contended anything short of a positive number will be a "big disappointment for the market."

"Manufacturing data is a bellwether for the health of the manufacturing sector and the entire economy. We have seen manufacturing data pick up in June, and analysts are very positive of manufacturing data going forward," Sanchez said Friday, adding that strong numbers would point to a backdrop that is positive for earnings going forward, particularly in the manufacturing sector.

American manufacturing company Snap-On reports its quarterly earnings next Thursday.

For some historical perspective, Bank of America Merrill Lynch economists wrote about the Treasury "flash rally" of October 2014, in which bond prices rallied and the yield on the U.S. 10-year Treasury note fell to 2.19 percent at its monthly low. This movement and trouble for bond market liquidity followed the release of disappointing retail sales, Producer Price Index and Empire manufacturing data, the authors wrote.

Indeed, retail sales data (along with Consumer Price Index data) disappointed when released Friday morning before the market opened, placing pressure on bond yields. Meanwhile, producer prices rose last month as reflected by data released Thursday.

"Empire and Philly Fed manufacturing indices should moderate from robust levels. Import prices are set to fall, driven by lower energy prices," the Bank of America team, led by chief U.S. economist Michelle Meyer, wrote.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more