US STOCKS-Wall St cuts losses after Trump pauses tariffs on Mexico for a month

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Updates prices with afternoon levels

By Shashwat Chauhan

Feb 3 (Reuters) - Wall Street's main indexes pared losses on Monday, as U.S. President Donald Trump delayed new tariffs on Mexico after his orders to levy steep tariffs on key trading partners sparked a global scramble to safe-haven assets earlier in the session.

Trump said on Monday he has paused new tariffs on Mexico for one month after the nation agreed to reinforce its northern border with 10,000 National Guard members to stem the flow of illegal drugs, particularly fentanyl.

Talking about the negotiations with Mexico, Steve Sosnick, chief market analyst at Interactive Brokers, said this "raises the possibility that there's some negotiating room with either Canada, China or both."

"Its much more encouraging to the markets (that) there's this pause and that is exactly why the market shot higher."

However, the New York Times cited a senior Canadian government official saying that Canada is not optimistic about getting a similar reprieve.

Over the weekend, Trump had imposed hefty new tariffs of 25% on imports from Mexico and Canada, and 10% on China - which he said may cause "short-term" pain for Americans.

Analysts at Citi noted that "if tariffs persist, markets are likely to move further (down) and inflationary effects will emerge."

At 11:58 a.m. ET, the Dow Jones Industrial Average .DJI fell 151.08 points, or 0.34%, to 44,393.58, the S&P 500 .SPX lost 48.59 points, or 0.80%, to 5,991.94 and the Nasdaq Composite .IXIC lost 241.23 points, or 1.23%, to 19,386.11.

Six of the 11 major S&P sectors turned higher, with defensive ones such as health care .SPXHC and consumer staples .SPLRCS leading gains.

Other megacap and growth stocks were also off lows, with Nvidia NVDA.O now down 3.3%, while a gauge of semiconductor stocks was now only down 1.5%.

Legacy automakers - who have been roiled by the impending tariffs - also recouped most of their losses with both Ford F.N and General Motors GM.N down over 1% each.

The economically sensitive Russell 2000 smallcaps index .RUT recovered from its three-week low, now down 1.1%.

Treasury yields edged down as investors fled to safer assets such as bonds and gold. Spot gold XAU= scaled an all-time high.

The Cboe Volatility Index .VIX, known as Wall Street's "fear gauge", dropped back from its highest level in a week, last at 17.72 points.

The quarterly earnings, meanwhile, remained in full swing, with Tyson Foods TSN.N gaining 1.7% after the meat packer raised its annual sales forecast, while IDEXX Laboratories IDXX.O added 11% after the animal diagnostics maker beat fourth-quarter profit and revenue estimates.

On the data front, U.S. manufacturing grew for the first time in more than two years in January, data from the Institute for Supply Management (ISM) showed.

Declining issues outnumbered advancers by a 2.04-to-1 ratio on the NYSE, and by a 2.54-to-1 ratio on the Nasdaq.

The S&P 500 posted nine new 52-week highs and 20 new lows, while the Nasdaq Composite recorded 29 new highs and 187 new lows.