It may be too close for comfort for stock investors.

After seeing oil prices skyrocket from days of turmoil in Libya, investors now must grapple with political protests in the world's top oil exporter, Saudi Arabia, and the impact of the biggest earthquake on record to strike Japan.

The S&P 500 was trading below its 50-day moving average this week, and is within reach of support at 1,275, a low touched in late January.

The confluence of events is making investors increasingly cautious. The market's recent weakness revived talk a correction is near, analysts said, even though stocks recovered on Friday from early losses to finish the day higher with the Dow back above 12,000 and the S&P 500 back above 1,300.

Stocks have rallied sharply since the start of September, with the S&P 500 still up 24 percent for that period, but have faltered in the last two weeks. At Friday's close, the Standard & Poor's 500 Index <.SPX> was down 1.3 percent for the week.

Oil prices were already moving higher before unrest in the Mideast, and if we do have something that is pronounced in Saudi Arabia -- and I don't think that's a high probability -- but if we do, the cards are off the table as far as where prices could go, said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.

The impact from that is, I think you've got a chance for another recession.

Protests in Saudi Arabia were more muted than what some had anticipated on Friday. Concerns arose that planned Day of Rage protests in the country could lead to further instability in the Middle East and North Africa.

INFLATION AND THE FED

The jump in crude oil prices to 2 1/2-year highs has raised anxiety about their dampening effect on the economy.

Given those concerns, investors will be tuned into any comments on energy from the Federal Reserve when it releases a statement following its policy meeting next Tuesday.

European Central Bank President Jean-Claude Trichet warned last week about inflation risks, and surprised investors by saying the bank may raise interest rates as soon as next month.

The U.S. central bank is unlikely to hint at policy changes next week, and is expected to keep interest rates near zero.

The Fed is essentially on autopilot. I think the market is correct in assuming they will do everything it takes, including initiating a 'quantitative easing part three,' if they have any evidence this economy doesn't have an escape velocity, said Joseph Battipaglia, market strategist at Stifel Nicolaus, in Yardley, Pennsylvania.

Next week also brings readings on inflation in the U.S. Producer Price Index and the U.S. Consumer Price Index, as well as data on industrial production.

QUAKE FALLOUT AND TECHNICALS

The massive earthquake and deadly tsunami in Japan, a top energy consumer, hit other markets hard on Friday.

It triggered an increase in risk aversion, with nervous Japanese liquidating investments overseas and bringing capital back to yen-denominated assets, according to WhatsTrading.com options strategist Frederic Ruffy.

The dollar fell 1.2 percent to 81.87 yen, while shares of the CurrencyShares Japanese Yen Trust rose 1.3 percent to $120.62.

For the week, the Dow Jones industrial average <.DJI> fell 1 percent, the S&P 500 slid 1.3 percent and the Nasdaq <.IXIC> lost 2.5 percent.

Besides a break below the 50-day moving average earlier this week, the S&P 500 fell below a long-standing trendline, suggesting the benchmark index has lost momentum and that the recent rally may be losing steam.

That behavior tells you demand has weakened, which puts odds on further downside in the near term, said Chris Burba, short-term market technician at Standard & Poor's in New York.

If the S&P 500 falls below 1,275, the next support area is 1,227 to 1,177, he said.

It looks increasingly likely at least pullback is under way, he said.

(Reporting by Caroline Valetkevitch; Additional reporting by Doris Frankel in Chicago; Editing by Jan Paschal)

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