"I would expect August to be mediocre or weak," said Don Townswick, director of equities at Conning. He said that had Friday's second-quarter GDP not been such a disappointment at a sluggish 1.2 percent, it could have provided a good springboard for the market into the week ahead.
There is a heavy data calendar coming up, as well as more than 100 S&P 500 companies reporting earnings, including Dow components Procter & Gamble and Pfizer.
"I think the GDP raised the impact value of every new piece of data," noted Art Cashin, director of floor operations at UBS.
Economists expect that 180,000 jobs were added in July, lower than June's snap back report of 287,000 jobs, according to Thomson Reuters. That report followed May's shockingly low 11,000.
Key to global financial markets are PMI reports from China to the U.K., the euro zone and U.S. on Monday. There is also U.S. ISM manufacturing data Monday, which should show a continued pickup in expansion in that sector. Economists expect car sales at a near 17 million annual pace when they are reported Tuesday.
Central banks could continue to stoke risk markets, and the Bank of England is expected to cut rates when it meets Thursday. That follows the Bank of Japan's announcement Friday of a smaller than expected stimulus package. That sent the yen flying, and the dollar tanked, falling even more after the weak GDP.
The Bank of England has signaled it could ease monetary policy in order to soften the impact of Brexit on the U.K. economy. "The consensus now is a 25 basis-point cut, no change in asset purchases, but the expectations are all over the place," said Win Thin, senior currency strategist at Brown Brothers Harriman.
Even with a choppy August, Townswick said the stock market should do OK for now. "I think that the current level of interest rates and the current level of economic growth are enough to justify the market at this level and the multiples that we see. With interest rates so dang low, it's difficult to justify multiple contraction if there's even a hint of economic growth," he said.
But if the economy stays in a slow growth rut for much longer, there could be trouble ahead for stocks.
"The biggest headwind the markets are going to face is they're not going to be able to squeeze earnings growth out of a slow-growth economy," Townswick said, adding that companies "have gone through sales growth four or five years ago. They've gone through buy backs. If companies want to continue to buy back shares because they can borrow money at such ridiculously low rates, that has to end at some point, and finally they've gone through corporate restructurings." But still there's no pickup in productivity, he said.
"I'd say two quarters and out, if the growth picture doesn't change, we're looking at a market that can't keep going up," said Townswick.
Treasury yields did a stunning about-face when the weak GDP hit on Friday, with the 10-year sliding to 1.45 percent in late trading. The dollar index was down more than a percent on the day, as of Friday afternoon, and the greenback was off 2.5 percent against the yen.
Thin said the dollar could continue to be a "punching bag" in the coming week, as the GDP growth number, sharply lower than the 2.5 percent expected, pushed off some expectations for the Federal Reserve to raise interest rates this year. Economists said that December remains a possibility, but market odds for a September rate hike fell.
Economists expect GDP to grow at more than 2 percent in the second half of the year.
"If employment disappoints, I think that's the kind of verification markets are looking for to say, 'Boy, this economy is in bad shape.' I think the Fed is doing the same thing," said William Lee, Citigroup head of North America economics. He said the Fed does not want to react to just one number.
"This inventory drag took away 1.2 percentage points of GDP growth. What the Fed is looking for is, will we get it back over the next two quarters," he said. Lee said he is expecting 170,000 nonfarm payrolls on Friday.
However, Joseph LaVorgna, chief U.S. economist at Deutsche Bank, said he expects the sluggishness to continue into the third quarter, with growth expected at 1.2 percent. His forecast for the second quarter was at the low end of Wall Street's forecasts — 1 percent, and he also correctly called 1 percent for the first quarter. Growth for the first quarter was revised down to 0.8 percent Friday, leaving the quarterly average GDP growth at 1 percent so far for 2016.
He expects 1.8 percent growth by the fourth quarter: "I wouldn't be surprised over the next six months if we see GDP growth pick up a little bit," he said.
Traders are also watching oil in the week ahead, after West Texas Intermediate crude futures fell nearly 10 percent in the past week, dipping into bear market territory — or a 20 percent decline from its recent high. WTI was just above $41 per barrel late Friday.