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 favoured riskier assets.
While U.S. equities gained, they ended below the session's highs as investors turned their focus to the U.S.-China trade war and slowing economic data.
"You've a bit of a euphoria after positive tweets from the president about the Mexico relationship and the delaying of tariffs," said Phil Blancato, CEO of Ladenburg Thalmann Asset Management in New York. Referring to weak May jobs data released on Friday, he added: "You can't deny the data. The data from last week is going to percolate to the surface."
After five days of gains, Wall Street's indexes may trade sideways without another catalyst, said Blancato, adding that progress in U.S.-China trade talks and Federal Reserve cuts in U.S. interest rates may be slower than investors expect.
"The only one that could really propel the market higher would be a trade deal with China or if the Fed comes in and surprises everybody by cutting interest rates in June," he said.
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.
The Dow Jones Industrial Average rose 78.74 points, or 0.3%, to 26,062.68, the S&P 500 gained 13.39 points, or 0.47%, to 2,886.73 and the Nasdaq Composite added 81.07 points, or 1.05%, to 7,823.17.
The pan-European STOXX 600 index rose 0.21% and MSCI's gauge of stocks across the globe gained 0.53%. Emerging market stocks rose 1.45%.
MEXICAN PESO GAINS
U.S. government bond yields rose as risk appetite was lifted by the U.S.-Mexico trade and migration deal signed on Friday.
Benchmark 10-year Treasury notes last fell 18/32 in price to yield 2.1466%, from 2.084% late on Friday.
Oil prices fell more than 1% on Monday as U.S.-China trade tensions continued to threaten demand for crude and as major producers Saudi Arabia and Russia had yet to agree on extending an output-cutting deal.
Brent crude futures settled down 1.6 percent, or $1.00, at $62.29 a barrel. U.S. West Texas Intermediate (WTI) crude lost 73 cents, or 1.4%, to end at $53.26 a barrel.
In currency trading, the dollar index rose 0.21%, with the euro down 0.17% to $1.1312.
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% against the Mexican peso, which was at its highest level since May 31.
Spot gold dropped 0.9% to $1,327.83 an ounce, after closing at its highest level since February on Friday.
(Additional reporting by Caroline Valetkevitch, 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