By Sinéad Carew
The U.S. dollar gained against a basket of major currencies while the Mexican peso was on track for its biggest one-day percentage gain against the dollar since July 2018.
The U.S.-Mexico trade and migration deal also boosted emerging market stocks and sent U.S. government bond yields higher as investors favored riskier assets.
"There's a nice follow through on last week's optimism that global growth is likely to continue with trade tensions with Mexico backing off. There's clearly a growth bias to the tilt of today's market," said Carol Schleif, deputy chief investment officer at Abbot Downing in Minneapolis.
U.S. stocks were also boosted by a United Technologies Corp agreement to combine its aerospace business with defense contractor Raytheon Co to create a new company worth about $121 billion.
The Dow Jones Industrial Average rose 145.54 points, or 0.56%, to 26,129.48, the S&P 500 gained 20.54 points, or 0.71%, to 2,893.88 and the Nasdaq Composite added 105.65 points, or 1.36%, to 7,847.75.
The pan-European STOXX 600 index rose 0.21% and MSCI's gauge of stocks across the globe gained 0.67%.
Emerging market stocks rose 1.51%.
MEXICAN PESO GAINS
Benchmark 10-year notes were last down 17/32 in price to yield 2.1414%, compared with 2.084% late on Friday.
With the Mexico dispute seemingly resolved, investors will now focus on whether U.S. President Donald Trump can achieve agreement with China. Trump said on Monday that he was ready to impose another round of tariffs on Chinese imports if he does not reach a trade deal with China's president at a Group of 20 summit later this month.
Oil prices edged lower on Monday in volatile trading as major producers Saudi Arabia and Russia had yet to agree on extending an output-cutting deal and U.S.-China trade tensions continued to threaten demand for crude.
Brent crude futures settled down 1.6 percent, or $1.00, at $62.29 a barrel. U.S. West Texas Intermediate (WTI) crude last traded down 1.3%, or 71 cents, at $53.28 a barrel.
In currency trading, the dollar index rose 0.23%, with the euro down 0.15% at $1.1314.
The euro pulled back after sources said European Central Bank policymakers were open to cutting interest rates should economic growth weaken.
The U.S. dollar was down 2.3% against the Mexican Peso, which was at its highest level since May 31.
China's yuan slipped to its weakest this year after the country's imports fell the most in nearly three years and as talks to end the Sino-U.S. dispute remained deadlocked.
Spot gold dropped 1.0% to $1,327.21 an ounce, after closing at its highest level since February on Friday.
(Additional reporting by Kate Duguid, Karen Brettell and Stephanie Kelly in New York, Tom Arnold in London, Hideyuki Sano in Tokyo and Noah Sin in Hong Kong; Editing by Dan Grebler and Steve Orlofsky)
By SinÃ©ad Carew