Will a bullish market be undone by record high oil prices?

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NEW YORK (CNN/Money) - Record oil prices and a falling dollar do not usually an up market make.

But that's what happened last week, and it's got some analysts concerned about what might happen in the week ahead, when there are few economic or earnings reports to distract investors.

After peaking in early April, oil prices sold off for a good six weeks, and the stock market rose in tune with it. But prices have been climbing steadily in June. On Friday, July contract reached a record intraday level of $58.60 a barrel and a record closing high of $58.40.

While Henny Pennys have been claiming that "the sky is falling" since oil started hitting the mid-$40 a barrel range, a number of economists argue that the $60 a barrel range that oil is nearing is in fact a cause for concern.

Should oil hit that point and maintain the level for some time, that would have an impact on the economy, on growth forecasts and certainly stocks.

Not that the stock market has been paying much attention. The Dow and S&P 500 both closed higher Friday for the seventh consecutive session.

"At any other time this year, when oil prices were up sharply, and the dollar was down, you'd see a selloff," said Donald Selkin, director of research at Joseph Stevens. "But right now the market is ignoring the oil prices, which is bizarre to me."

"I think we're going to cool off next week," he said, "and sell a bit into the Fed week."

While there are a number of economic reads and a few earnings reports due over the next two weeks, the market's main focus will be the upcoming Fed meeting, June 29 and 30.

The central bank is widely expected to boost the Fed Funds rate, an overnight bank lending rate, by a quarter-percentage point to 3.25 percent. The central bank has boosted rates 8 times since it began its rate-hike campaign last year.

Many Fed watchers expect another 25 basis points at the August meeting. (There are 100 basis points in a percentage.)

However, recent economic reports -- showing slower growth and still mild inflation -- have given some investors the idea that the Fed may halt its campaign after August, something economists question.

Another issue: If oil prices are heading back up steadily, the mild May inflation numbers may be just a short-term phenomenon. If inflation starts to heat up, the Fed would be less likely to pause ratcheting rates higher.

"The May numbers we've seen so far seem to show that we've recovered from the soft patch in the spring," said John Hughes, market analyst at Shields & Co. "But the numbers have been a little weak."

While the trend of the market has been up recently, it is unlikely to move much one way or the other as investors wait for the Fed to clarify these discrepancies, Hughes said.

Seasonal factors also suggest continued weakness in June.

In addition, the ratio of negative-to-positive second-quarter pre-announcements is the most negative it has been in eight quarters, according to earnings tracker Thomson/First Call.

What's helping in the short term is that "there is a lot of internal strength," Joseph Stevens' Selkin said, referring to the technical makeup of the market of late, and the number of stocks making new 52-week highs versus those making new 52-week lows.

Here's what to look out for this week.

• Monday brings the May read on leading economic indicators. LEI is expected to have fallen 0.3 percent in the month, according to a consensus of economists surveyed by Briefing.com, after falling 0.2 percent in April.
• On Tuesday, homebuilder Lennar (Research) is expected to report earnings of $1.31 per share, according to a consensus of analysts surveyed by First Call, up from $1.22 a year ago.
• Morgan Stanley (Research), due to report earnings Wednesday, is expected to have earned 91 cents per share, down from $1.16 a year ago.
• On Thursday, FedEx (Research) is expected to report earnings of $1.48 per share, analysts forecast, versus $1.33 a year ago.
• On Thursday, the read on existing home sales in May is due. Sales are expected to have fallen to a 7.15 million unit annual rate from a 7.18 million unit annual rate in April.
• New home sales, due Friday, are expected to have risen to a 1.325 million unit annual rate in May from a 1.316 million unit annual rate in April.
• Durable goods orders, due Friday, are expected to have risen 1 percent in May after rising 1.9 percent in April.