July jobs report could be what gives the market its next big jolt in the week ahead

The U.S. Bureau of Labor Statistics will release theon the morning of Friday, Aug. 6. It's expected to show 788,000 nonfarm payrolls, down from 850,000 in June. The unemployment rate is expected to dip to 5.7% from 5.9%. Average hourly wages are expected to rise 3.9% year over year.

Barry Knapp, director of research at Ironsides Macroeconomics, said he expects the next two monthly jobs reports will be strong, and the Fed should then be ready to announce at its September meeting that it is ready to begin the slow unwind of its bond purchasing program. That is an important step since it would be the first real move away from the central bank's easy policies that were put in place in the pandemic. It would also mean the Fed would be open to raising interest rates once the tapering is completed."Friday could be a game changer," Knapp said of the employment report. Before that, he expects stocks to trade in a narrow range.

If the number of jobs added in July is much higher than expected, at more than 1 million, Knapp said the market could immediately sell off on the idea the Fed would be ready to pare back its bond purchases. If the number is weaker than expected, the market could rally. "We are in a dead period after earnings, with concerns about the pace of the reopening. It's still a bit of a question mark. The bias would be higher after a weak number... Bad is good. Good is bad," said Knapp.

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