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U.S. Stocks Pull Back Off Best Levels But Still Close Mostly Higher

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Stocks showed a strong upward move in morning trading on Monday but gave back some ground over the course of the afternoon. The major averages still managed to end the day in positive territory, adding to the strong gains posted last week.

The tech-heavy Nasdaq outperformed its counterparts, surging up 81.07 points or 1.1 percent to 7,823.17, while the Dow and the S&P 500 reached their best closing levels in a month. The Dow rose 78.74 points or 0.3 percent to 26,062.68 and the S&P 500 climbed 13.39 points or 0.5 percent to 2,886.73.

The morning rally came in reaction to news the U.S. and Mexico have reached an agreement to avert President Donald Trump's threatened tariffs on all Mexican imports.

Trump revealed in a post on Twitter late Friday that the 5 percent tariff he threatened to impose on Mexican imports beginning today has been "indefinitely suspended."

The suspension of the tariff threat comes as the two countries signed a deal Trump claims will help stop the flow of migrants through Mexico and into the U.S.

Details of the deal announced by the State Department indicated Mexico will take unprecedented steps to increase enforcement to curb irregular migration, including deploying 6,000 troops from its newly formed National Guard to its southern border.

However, some analysts have questioned the impact of the steps being taken by Mexico, arguing Trump threatened to derail a key economic partnership for a deal that ultimately maintains the status quo.

Trump also warned on Twitter this morning that the tariffs will be reinstated if Mexico's legislative body does not approve an unrevealed but "very important" part of the deal.

The president also indicated in an interview with CNBC that he would continue to use tariffs to advance American interests in trade talks with China.

Trump argued that existing tariffs on Chinese imports will force China to make a deal and threatened to impose more tariffs if Chinese President Xi Jinping does not attend a planned meeting at the G-20 summit later this month.

Sector News

Semiconductor stocks turned in some of the market's best performances on the day, resulting in a 2.5 percent jump by the Philadelphia Semiconductor Index.

The index has shown a substantial rebound after ending the last trading day of May at its lowest closing level in nearly four months.

Significant strength also remained visible among financial stocks, with the KBW Bank Index and the NYSE Arca Broker/Dealer Index climbing by 1.1 percent and 1.2 percent, respectively.

Retail and transportation stocks also saw considerable strength on the day, while natural gas and gold stocks showed notable moves to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably higher during trading on Monday. Japan's Nikkei 225 Index surged up by 1.2 percent, while Hong Kong's Hang Seng Index soared by 2.3 percent.

The major European markets also moved to the upside on the day, although the German markets were closed for a holiday. While the U.K.'s FTSE 100 Index advanced by 0.6 percent, the French CAC 40 Index rose by 0.3 percent.

In the bond market, treasuries came under pressure amid the easing trade concerns. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.9 basis points to 2.143 percent.

Looking Ahead

News on the trade front is likely to remain in the spotlight on Tuesday, although trading could also be impacted by reaction to a report on wholesale inflation.

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