Oil's big tease

By Charley Blaine and Elizabeth Strott

Oil is the talk of Wall Street again today.

Crude oil was up again this afternoon after falling more than $2 earlier in the session, giving an initial lift to stocks. But oil's rise dampened hopes of an extended pullback in oil prices after oil closed down more than $3 on Tuesday.

The price of crude was up $2.29 to $131.14.

Stocks were drifting lower this afternoon, as oil's climb weighed on the markets. At 2 p.m. ET, the Dow Jones Industrial Average was down 29 points to 12,519. The Nasdaq Composite Index had lost 10 points to 2,471, and the Standard & Poor's 500 Index had shed 4 points to 1,381.

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"There's trepidation at these price levels. High energy prices are having a substantial impact on the economy and potentially on demand," Phil Flynn, senior trader at Alaron Trading, said to Bloomberg News. "After failing to break through $135 decisively last week, it appears we've put a resistance line there."

Stephen Schork is telling readers of his energy industry newsletter, "The Schork Report," that the recent rally in oil went too far. He explained his view to CNBC this morning.

"We just had such an egregious run-up, not only in the front month, but in the prices for commodities delivered in the years 2010 out to the year 2016. Fundamentals simply cannot move that fast," Schork said. "What has happened is that this is absolutely a bubble, where all of this fear and greed is being compressed into prices and it's driving prices up.

"We're looking at the rising prices and saying that the rising prices justify high prices. The fundamentals simply don't justify this run-up," Schork said.

Talk of a recession, while worrisome for the overall economy, may be a good thing for the energy markets, according to one analyst.

"Inflation has become so virulent that we actually see signs of a recession as good news, now," Cameron Hanover oil analyst Peter Beutel wrote in a note to clients. "If the (Federal Reserve) will just leave it alone and let (a downturn) happen, there is new hope that the seemingly endless advance in commodities prices could be getting ready to end. It is too early to proclaim an end to the bull markets, but at least there is hope."

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"A recession would stifle energy demand potentially long enough for new supplies to catch up," Beutel wrote.

Dow Chemical: Energy crisis hurting

Dow Chemical (DOW, news, msgs) this morning said it will raise prices by up to 20% starting next month because of surging energy prices.

Dow Chief Executive Officer Andrew Liveris blamed the government. "For years, Washington has failed to address the issue of rising energy costs and, as a result, the country now faces a true energy crisis, one that is causing serious harm to America's manufacturing sector and all consumers of energy," Liveris said in a statement.

"The government's failure to develop a comprehensive energy policy is causing U.S. industry to lose ground when it comes to global competitiveness, and our own domestic markets are now starting to see demand destruction throughout the U.S.," Liveris said.

The company's action could prompt copycat moves from others in the sector, one analyst said. "Dow is probably leading the charge here in being this aggressive, and others are probably going to follow suit," said money manager Tom Uutala at Victory Capital Management, to Bloomberg News. "It's going to be interesting to see if there's some demand destruction."

Shares of Dow rose 48 cents, or 1.2%, to $40.71 this afternoon.

JetBlue delays plane order

Oil prices have walloped airlines as well, and are now forcing JetBlue (JBLU, news, msgs) to delay the purchase of 21 Airbus jets.

JetBlue late Tuesday said it is deferring deliveries of the A320 jets until 2014 and 2015.

"In the face of escalating fuel costs, we believe it is essential to take a more financially conservative approach to managing our business," said JetBlue Chief Executive Dave Barger in a statement.

The aircraft originally had been scheduled to be delivered between 2009 and 2011. The delay means JetBlue will bring only 11 new aircraft into its fleet during the next few years.

"Most of those planes were meant for expansion. You don't expand at $4-a-gallon jet fuel," aviation consultant Mike Boyd told The Associated Press. "When you have a downturn . . . not taking on the debt and the problems with 21 new airplanes, that's a good move."

Shares lost 24 cents, or 5.5%, to $4.17 in afternoon trading.

United-US Airways merger on hold?

Meanwhile, although pressure from soaring oil prices has encouraged talk of consolidation in the airline industry, a merger between UAL's (UAUA, news, msgs) United Airlines and US Airways (LCC, news, msgs) does not look like it's happening, according to The New York Times. There has been little or no contact between the two airlines in recent days, the Times wrote. It suggested the talks have been put on "permanent hold."

"Mergers in and of themselves are not the answer. Look around the world -- airlines are making money, in Europe, Asia and Latin America," said Mo Garfinkle, a veteran airline industry consultant, in an interview with the paper. "There's a more fundamental problem here. We need to cut capacity."

Some industry observers are speculating that mergers are too costly, a line of thinking that could put weaker airlines in even greater jeopardy. A number of smaller airlines -- including ATA Airlines and Aloha Airlines -- have declared bankruptcy and shut down operations, blaming the increased cost of fuel.

More stable companies are trying to increase revenue and cut other costs. Last week, AMR's (AMR, news, msgs) American Airlines announced plans to start charging for a first checked bag.

Durable goods fall just a bit

Meanwhile, there was a ray of hope for the economy in orders for U.S. durable goods, which slipped 0.5% in April -- better than the 2.8% decline economists had expected.

Excluding the 8% decline in transportation goods, durable-goods orders actually rose 2.5%, the biggest increase since July 2007. Orders for electrical equipment, appliances and components soared 27.8% last month, and defense capital goods increased 4.8%.

Aircraft orders, however, slumped 24.4% in April.

GE going greener

General Electric (GE, news, msgs) this morning announced plans to cut its global water use by 20% by the year 2012.

"We believe, just like greenhouse-gas emissions have been a big societal challenge, the same thing is true for water," said CEO Jeffrey Immelt at a news conference in Beijing. "We are committed to using our technology both inside and outside the company to reduce our water consumption.

GE said it used 10 billion gallons of fresh water in 2006 in cooling towers and other manufacturing processes.

Separately, GE said that South Korea's LG Electronics was the front-runner to buy its appliance unit. Also in contention are China's Haier Electronics Group, Sweden's Electrolux, Mexico's Controladora Mabe and Turkey's Arcelik.

GE put the century-old appliance unit up for sale this week. The division could fetch between $4 billion and $8 billion.

Shares of GE shed 7 cents to $30.33.

Rumor mill killed Bear

More than two months after the meltdown of financial-services giant Bear Stearns (BSC, news, msgs), the company is preparing to give the Securities and Exchange Commission documents it says show the company collapsed as other financial companies rapidly abandoned business relationships with Bear based on rumors and fears that were initially unfounded, but became self-fulfilling, The Wall Street Journal reported this morning. CEO Alan Schwartz called the stock's decline during the week of March 13 just "noise," but by that weekend, Bear Stearns had run through $15 billion of cash reserves as confidence in the company waned, the paper wrote.

The withdrawals forced Schwartz to call JPMorgan Chase (JPM, news, msgs) CEO Jamie Dimon about a takeover.

Bear Stearns was eventually rescued on March 16, with an agreement involving both JPMorgan and the Federal Reserve. Bear Stearns stock was finally valued at $10 per share, 89% lower than the $87.89 share price at the beginning of 2008.