Dow Jones Industrial Average bounces on Iran's latest Hormuz offer

Iran has proposed reopening the Strait of Hormuz within seven days of Washington accepting its conditions, prompting a rise in the Dow Jones Industrial Average ahead of Washington's response. The index is currently near 51,800 and on track to end a three-day losing streak. West Texas Intermediate (WTI) Crude Oil fell towards $92.00 following the offer.

Cheaper fuel benefits 29 of the Dow's 30 members, excluding Chevron (CVX), which is the sole oil producer. Japan's Kyodo News reported the seven-day offer on Tuesday, causing the index to decline that day and the subsequent two days. Iran's Foreign Minister Abbas Araghchi is currently in New York, awaiting a response. Iran's terms include returning to the June memorandum of understanding (MoU), lifting the naval blockade, unfreezing some Iranian assets, restoring an oil sanctions waiver, and ending Israel's war in southern Lebanon, most of which should be completed within four to five days.

The June MoU saw passage through Hormuz in exchange for an end to the blockade, but it collapsed into renewed fighting. Ongoing hostilities have not interrupted the talks. Houthi missiles fired at Saudi Arabia on Thursday drove Brent Crude Oil to a session high near $108.00 before falling back on the phased-deal report. Brent has gained more than 17% in September, with the October payment affecting every Dow member that ships goods or sells to drivers.

The 10-year Treasury yield hit 5.23% on Friday, its highest since June 2007, while the 30-year yield peaked since 2004 on Thursday. Mortgages and corporate debt are priced based on these yields, with the average 30-year mortgage rate above 7%, impacting Home Depot (HD) and Sherwin-Williams (SHW). Friday's data kept another rate hike on the table.

Durable goods orders were flat in August against a forecast of a 0.4% decline, while business equipment orders outside aircraft rose 1.6% against an expected 0.5%. The latest University of Michigan survey indicated consumers expect 4.6% inflation over the next year, exceeding the Fed's 3.75-4.00% forecast. Traders reduced the probability of an October hike to around 66% from 77.5% on Thursday as Crude Oil prices declined, with the rally driven by this change rather than the 10-year yield.

Fed Governor Barr suggested additional increases may be necessary, while New York Fed President Williams deemed another hike this year reasonable. Fed Chair Powell no longer hints at moves ahead of time, so these odds carry no guidance from the Federal Open Market Committee (FOMC) before its October 28 decision, six days before the midterm elections.

The Dow is near its starting point for the week, with the 10-year yield peaking at a 19-year high. Resistance is near 51,800, where the rally stalled on Tuesday, while 52,000, where the index dipped on Tuesday, has not been regained on a closing basis. Support is found in the 51,300 area, established during the Michigan release and maintained.

The short bias is below 52,000, with Thursday's low at 51,100 as the initial target and the 200-day Exponential Moving Average (EMA) near 50,400 as the second objective. The daily Stochastic Relative Strength Index (Stoch RSI) is near 19, at the bottom of its range, suggesting the bounce could extend towards 52,000 without altering the sentiment. A daily close above 52,000 would put an end to the short hypothesis.