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* Mexico and U.S. close in on NAFTA deal
* Industrials rise; Ford, GM, Fiat also gain
* Tesla dips after abandoning plan to go private
* Indexes up: Dow 0.83 pct, S&P 0.63 pct, Nasdaq 0.68 pct (Updates to open)
By Shreyashi Sanyal
Aug 27 (Reuters) - U.S. stocks posted strong gains on Monday, with the benchmark S&P 500 and the Nasdaq hitting all-time highs, as news that the United States and Mexico were closing in on a trade deal added to optimism about the economy.
A Mexican source familiar with the talks told Reuters "it's almost certain" that there will be an announcement about the North American Free Trade Agreement later in the day and U.S. President Donald Trump tweeted, "a big deal looking good with Mexico!"
Also helping sentiment was Washington pressing the European Union to speed up trade negotiations.
Nine of the 11 major S&P 500 sectors were higher. The top gainer was the materials sector with a 1.38 percent increase, as prices of metals and gold rose. The trade-sensitive industrials sector was up about 0.82 percent.
Boeing and Caterpillar rose 1.5 percent and 2.5 percent, respectively. Shares of automakers Ford, General Motors and Fiat Chrysler were up between 1.86 percent and 2.26 percent.
"What we are seeing is optimism that there is going to be some resolution to trade difficulties and then there's the news of the U.S. and Mexico closing in on the NAFTA deal," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
"Easing trade and NAFTA are probably the biggest things today but I think it's more fundamental than that, because we're still seeing a lot of signs of strength in the domestic economy and earnings stories have been very robust."
Federal Reserve Chairman Jerome Powell said on Friday that the central bank's gradual interest rate hikes were the best way to protect the economic recovery, maintain strong job growth and keep inflation under control.
At 10:01 a.m. EDT the Dow Jones Industrial Average was up 213.17 points, or 0.83 percent, at 26,003.52, the S&P 500 was up 18.15 points, or 0.63 percent, at 2,892.84 and the Nasdaq Composite was up 54.28 points, or 0.68 percent, at 8,000.25.
The defensive utilities sector dropped 0.29 percent, and the real estate sector dropped 0.01 percent.
Chipotle Mexican Grill slipped 3 percent, the most on the S&P, after Wedbush downgraded its shares, citing higher risks to the burrito chain's near-term same-store sales and margin estimates.
Tesla Inc dropped 1.9 percent after abandoning a plan to take the electric carmaker private.
Advancing issues outnumbered decliners for a 3.01-to-1 ratio on the NYSE and a 2.61-to-1 ratio on the Nasdaq.
The S&P index recorded 42 new 52-week highs and no new lows, while the Nasdaq recorded 121 new highs and 13 new lows. (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta)