U.S stocks end higher on hopes Fed stays loose; Dow rises 0.40%

U.S. stocks finished higher on Wednesday after a widely-watched industrial output gauge missed expectations and fueled hopes the Federal Reserve will keep monetary policy loose.

At the close of U.S. trading, the Dow Jones Industrial Average finished up 0.40%, the S&P 500 index ended up 0.51%, while the Nasdaq Composite index rose 0.26%.

Government data released earlier revealed that U.S. industrial production fell more than expected in April, contracting 0.5% after expanding a revised 0.3% in March. 

Analysts were expecting industrial production, which gauges output at the country's factories, mines and utilities, to contract by 0.2% last month. 

The Federal Reserve is currently buying USD85 billion in assets such as mortgage debt or Treasury holdings from banks each month, a monetary stimulus tool known as quantitative easing that weakens the greenback to spur recovery, with stock prices rising as a side effect.

Wednesday's data convinced many investors such programs will stay in place for now.
Prices at the wholesale level in the U.S. disappointed as well, which also fueled sentiment that the Fed will continue with its liquidity injections.

The U.S. Department of Labor said the country's producer price index fell 0.7% in April, outpacing analysts calls for a 0.6% fall and beyond the 0.6% decline during the previous month. 

Core producer price inflation, which excludes food and energy, rose 0.1% last month, in line with expectations after a 0.2% increase the previous month. 

A regional manufacturing barometer in the U.S. disappointed as well.

The Federal Reserve Bank of New York's Empire State manufacturing index slid to -1.4 in May, from a reading of 3.1 last month, disappointing expectations for a rise to 4.0.

Leading Dow Jones Industrial Average performers included American Express, up 1.76%, JPMorgan Chase, up 1.65%, and Procter & Gamble, up 1.54%.

The Dow Jones Industrial Average's worst performers included Hewlett-Packard, down 2.56%, Chevron, down 1.61%, and Alcoa, down 0.70%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 0.50%, France's CAC 40 rose 0.41%, while Germany's DAX 30 finished up 0.28%. Meanwhile, in the U.K. the FTSE 100 finished up 0.11%.

On Thursday, U.S. will unveil official data on building permits and housing starts. The U.S. is also to release official data on consumer inflation, initial jobless claims and the Philly Fed manufacturing index.