The battle occurred as a result of Mexican efforts to besiege an American military installation, Fort Texas, which the Mexicans viewed as having been built within the boundaries of Mexican Texas.
Before the opening shots of the engagement, many foreign observers were convinced that Mexico's larger and more professional army would easily defeat that of the United States. The opposite result, however, proved to be the case at Palo Alto. Mexican troops were positioned poorly, despite the orders of General Arista, and America's so called Flying Artillery wrecked havoc in Mexican lines.
Toward the end of the day, some progress was made by the Mexicans in advancing against the American line, but as became quite common as the war dragged on, the Mexicans instead chose to withdraw from the field, somewhat surprising Zachary Taylor.
The next engagement of the war, the Battle of Resaca de La Palma[?], was waged the next day.
Bauer, K. Jack, "The Mexican-American War, 1846-1848"