US Stocks and Gasoline Prices: What’s Behind the Recent Drop?
Market Overview as of August 2, 2025
Lately, US stocks and gasoline prices have been falling. This is making investors nervous. Many are worried that the economy is slowing down. At the same time, the Mexican peso has hit a new low, which shows that the pressure isn’t just in the US—it’s also being felt across nearby markets.
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Let’s break down what’s really going on with the stock market, energy prices, and what it could all mean for the months ahead.
US Stock Market: Under Pressure
Big Moves in Major Indexes
In 2025, US stocks have gone through a rough patch. Early in the year, markets took a sharp dip. The S&P 500, Nasdaq, and Dow Jones all dropped heavily.
Here’s what happened:
| Index | Date | Drop |
|---|---|---|
| S&P 500 | March 10, 2025 | Fell 2.7% |
| Nasdaq | March 10, 2025 | Fell 4% |
| Dow Jones | March 10, 2025 | Down 890 points (2.08%) |
These drops were tied to rising trade tensions. Investors were reacting to new tariff policies from President Trump. This caused fears about a possible recession.
Surprisingly, markets managed to bounce back a bit by late July 2025. Both the S&P 500 and Nasdaq hit record highs before falling again after Trump introduced more tariff plans.
On August 1, the Dow Jones fell by another 500 points. At the same time, the VIX, which measures market fear, jumped 25%.
Why Are Markets So Unstable?
The main reason is simple: tariffs. Since returning to office in 2025, Trump has pushed for higher import taxes. On April 2 (called “Liberation Day”), he announced a wide range of new tariffs:
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- 10% on all imports
- 245% on Chinese goods
- 49% on items from Cambodia
This hit markets hard. The S&P 500 dropped 5.97% that day. The Nasdaq entered a bear market, meaning it was down more than 20% from recent highs.
Sectors That Are Feeling It the Most
1. Technology
Big tech companies have been heavily affected. The “Magnificent Seven,” including Apple and Amazon, saw big sell-offs. Amazon alone fell by more than 8% on August 1 after giving a weak forecast.
2. Manufacturing
The Manufacturing PMI from the Institute for Supply Management stood at 49.1 in July 2025. That means the industry has been shrinking for 13 months in a row.
3. Safe-Haven Assets
Meanwhile, investors are moving their money into gold and other safe places. Gold prices have climbed to $3,350 per ounce.
US Gasoline Prices: Falling Fast
What’s Happening at the Pump?
Gasoline prices in the US have been falling throughout 2025. That may sound good for consumers, but it’s also a sign that the economy might be slowing down.
According to the US Energy Information Administration (EIA), fuel demand has dropped. This includes a 30,000 barrel-per-day decline in distillate use in the second half of the year compared to 2024.
This is because there’s less industrial activity and fewer goods being moved around. Less demand means cheaper fuel.
Crude Oil Prices in 2025
| Date | Brent Crude (USD) | WTI (USD) |
|---|---|---|
| Early May | $60.48 | $57.42 |
| Late June | $78.42 | $77.19 |
In May, prices hit their lowest point in almost two years. Later, they bounced back a bit but remain under pressure. One reason is OPEC+ increasing oil supply in July.
Why This Matters
Cheap gasoline helps people save money, especially when inflation is high. But there’s a downside.
When fuel prices drop due to lower demand, it often means the economy is cooling off. Businesses are slowing down, fewer goods are being transported, and factories are cutting back.
According to EIA, global GDP may grow at 3% yearly until 2030. But for the US, it might stay closer to 1.8%. Also, the number of new oil wells is down to 5,164 in early 2025. That’s fewer than in past years and shows slower energy sector activity.
Stocks and Oil Are Moving Together
Usually, energy and stocks don’t always move the same way. But in 2025, that changed. In March, the one-month correlation between oil prices and US stocks was 0.9. That’s very high.
Because of this, it’s been harder for investors to build balanced portfolios. Many are now shifting to safer assets like gold.
What’s the Federal Reserve Doing?
The Federal Reserve has been cautious. It already cut interest rates in 2024 by 100 basis points. That brought rates to 4.25%–4.50%.
In 2025, it stopped cutting to see what impact Trump’s tariffs would have. Fed Chair Jerome Powell said they are watching inflation and growth closely.
If the economy slows more, they might cut again. But if tariffs raise prices too much, the Fed might not be able to lower rates without making inflation worse.
Mexican Peso: Falling Fast
Currency Weakness
The Mexican peso has dropped past 18.80 per US dollar, its lowest in a month. This is due to both domestic issues and outside pressures.
Mexico’s Manufacturing PMI also stands at 49.1, same as the US, meaning the sector is shrinking. Business confidence is weak too.
Why the Peso Is Struggling
Mexico’s economy depends a lot on exports to the US—about 80% of its trade. So, when the US threatens tariffs, Mexico feels it fast.
Trump has talked about:
- 50% duties on steel and aluminum
- 25% duties on cars from Mexico
That has scared investors. Even though a 90-day delay was announced, the uncertainty is hurting the peso.
Mexico’s Response
President Claudia Sheinbaum sent 10,000 national guard troops to the border, which helped pause the tariffs for now.
But the risk is still there. If Trump moves forward, JPMorgan says the peso could fall another 12%. Mexico may even retaliate with tariffs of its own, which could hit American consumers too.
Rate Cuts in Mexico
Mexico’s central bank, Banxico, has cut rates to 10.00% in 2024. It may go as low as 8.00% by the end of 2025. Meanwhile, the Fed isn’t cutting much. This difference in interest rates makes the peso weaker, as money flows into the US instead.
Global Markets: Feeling the Heat
Tariffs Impacting Everyone
The tariff war isn’t just a US-Mexico problem. It’s affecting stock markets around the world.
Here’s what’s happened:
- Nikkei 225 had its worst day since 2020
- South Korea’s KOSPI dropped sharply
- Canada’s TSX also slipped
- China added new tariffs on US farm products
As of April, US goods now face 34% tariffs in China.
Goldman Sachs says tariffs could raise core inflation by 0.7% and lower US GDP by 0.4%.
Global Recession Risk?
With trade slowing and costs rising, more people are talking about a possible global recession. JPMorgan estimates a 40% chance due to the spillover from US policies.
How Investors Are Reacting
Flight to Safety
People are moving their money to safer places:
- Gold is up because the dollar is down
- Treasury bonds are in demand
- Crypto is struggling; Bitcoin and others have dropped
The 10-year US Treasury yield fell to 4.045% in April. That’s a sign that people are worried and want safe returns.
What Portfolio Managers Suggest
Many are playing it safe. They’re waiting to see how the trade situation evolves.
Some think Trump may ease up on tariffs later. That happened in the past with Japan. But this time feels different. The scale of the tariffs is much larger.
Frequently Asked Questions (FAQs)
Why are US gasoline prices falling?
Because demand is down. The economy is slowing, so less fuel is being used for transport and industry.
Are low gas prices good or bad?
Both. They help consumers save money but can also signal that the economy is weakening.
Why is the stock market reacting to tariffs?
Tariffs increase costs, reduce profits, and hurt global trade. That makes investors nervous.
Will the Federal Reserve cut interest rates again?
Maybe. It depends on how bad things get. If growth slows more, the Fed might act.
How are global markets being affected?
Markets in Japan, South Korea, Canada, and China are all feeling the impact of US tariffs and trade tensions.
The fall in US stocks and gasoline prices is not just about numbers. It reflects deep concerns about where the economy is heading. With tariffs, falling industrial demand, and global trade tensions, 2025 has become a tough year for markets.
While some sectors and assets are holding up, the big picture remains unclear. Investors, policymakers, and everyday people should keep an eye on the signs—especially when prices and currencies start moving together.
The coming months will likely depend on whether trade talks improve, how central banks respond, and if companies can keep delivering good earnings despite all the pressure.
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