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* Trump scraps tariffs as Mexico vows to tighten borders
* U.S. carmakers, Constellation Brands rise
* United Tech, Raytheon merge; Salesforce to buy Tableau
* Indexes up: Dow 0.56%, S&P 0.80%, Nasdaq 1.52% (Updates to early afternoon)
By Aparajita Saxena
June 10 (Reuters) - U.S. stocks were higher on Monday after the United States dropped plans to impose tariffs on Mexican goods, with a couple of multi-billion dollar deals adding to the upbeat mood.
Mexico on Friday agreed to step up efforts to stem the flow of illegal Central American migrants after Washington threatened to impose a 5% import tariffs on all Mexican goods starting Monday.
"The reversal on Mexican tariffs removes one potential source of worry for investors about corporate profits and economic growth and helps improve sentiment towards stocks," said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
The S&P 500 index and the Dow Industrials rose to a one-month high, following their biggest weekly gains since the end of November. The benchmark index is now just 2% shy of its record high hit in early May.
U.S. automakers, which have long built vehicles in Mexico, traded higher, with General Motors Co gaining 1.9% and Ford Motor Co 1.2%. Corona beer maker Constellation Brands , which has significant Mexico exposure, rose 2.2%.
Among major deals, United Technologies Corp agreed to combine its aerospace business with defense contractor Raytheon Co to create a new company worth about $121 billion.
Shares of United Technologies, however, dropped 1.7%, after Trump said he was a "little concerned" about their merger as it could take away competition in the sector. Raytheon rose 1.6%.
Salesforce.com Inc said it would buy big data firm Tableau Software for $15.3 billion. Salesforce.com shares fell 5%, while those of Tableau surged 35%.
"It is not just about the market, it is the underlying economy which is not likely to weaken if you have these signs of business optimism," said Willie Delwiche, investment strategist at Robert W. Baird in Milwaukee.
Technology stocks rose 1.44% and provided the biggest boost among the eight major S&P sectors trading higher.
Large-cap companies, including Apple Inc, Microsoft Corp, Amazon.com and JPMorgan Chase, rose between 1.5% and 4%.
At 12:55 p.m. ET the Dow was up 145.03 points, or 0.56%, at 26,128.97, the S&P 500 was up 22.97 points, or 0.80%, at 2,896.31 and the Nasdaq Composite was up 118.02 points, or 1.52%, at 7,860.12.
Among sectors, only the defensive utilities, consumer staples and real estate were trading lower.
Chemical maker LyondellBasell Industries rose 5.8%, the most among S&P companies, following a 37 million share buyback program on Monday.
Kraft Heinz Co gained 4.8% after the packaged food company said the financial numbers it restated last month were accurate following completion of an internal investigation.
Advancing issues outnumbered decliners by a 1.95-to-1 ratio on the NYSE and 2.31-to-1 ratio on the Nasdaq.
The S&P index recorded 60 new 52-week highs and one new low, while the Nasdaq recorded 93 new highs and 39 new lows. (Reporting By Aparajita Saxena and Shreyashi Sanyal in Bengaluru; Editing by Arun Koyyur and Anil D'Silva)