The stock market took one bad piece of economic news in its stride, but watch out for a potential double whammy of gloom this week. Traders shrugged off a surprising contraction in the labor market, which wasn't too much of a concern, but the real risk is fresh inflation data on Wednesday, and a higher read.

Markets start off this week digesting Friday's payrolls report, which showed the economy lost 23,000 jobs last month. While a single month's data shouldn't cause too much alarm, it raises the stakes for the consumer price index. Equities, and especially technology stocks, could do with a benign reading.

The initial conclusion from the weak jobs data is it should prompt the Federal Reserve to act cautiously. Traders now price in a 56% chance the central bank will hold rates steady in September, up from 33% last week. But the danger is that inflation ahead of the Fed's target rate of 2% could leave the market confused about the central bank's intentions, with three monetary policymakers already having voted for higher rates at the previous meeting.

The specter of stagflation -- slower economic growth amid rising prices -- still lingers over what is otherwise a thriving market. With most of the S&P 500 having reported second-quarter figures, 86% have beaten Wall Street's expectations and earnings are around 29% higher on average than forecast. JPMorgan on Monday lifted its year-end target for the S&P 500 to 8,000, citing the exceptionally strong earnings season.

Still, investors are looking for reassurance that this isn't as good as it gets, especially around the artificial-intelligence trade. With cloud-computing provider CoreWeave, server maker Super Micro Computer, and networking company Cisco Systems all reporting this week, there will be plenty more evidence for how the AI boom is faring.

Strong tech earnings and a benign CPI figure could send stocks surging higher. But watch out below if inflation heats up and any of the big AI names stumbles. Given what happened on Friday a surprise is possible.