U.S. stocks gain on surging U.S. home sales; Dow rises 0.91%

U.S. stocks rallied on Wednesday on news that new homes in the U.S. far surpassed expectations, giving investors hope the economy will improve and boost corporate top lines down the road.

The Volatility S&P 500 index, which measures the outlook for market volatility, was down 11.25% at 13.25.At the close of U.S. trading, the Dow 30 rose 0.91%, the S&P 500 index rose 0.78%, while the Nasdaq Composite index rose 1.03%.

The Census Bureau reported earlier that U.S. new home sales rose 18.0% last month to 504,000 units, far surpassing expectations for a 4.4% gain to 430,000 units. New home sales for July were revised to a 1.9% increase from a previously estimated 2.4% drop.

The numbers sent stock prices gaining by keeping sentiments strong that U.S. recovery is gaining steam despite hiccups here and there.

Separately, the Department of Energy reported earlier that crude stockpiles plunged by 4.3 million barrels last week, confounding market calls for a build of 386,000, which further stoked expectations that the U.S. economy is improving as evidenced by its demand for fuel and energy.

Wednesday's data came a day after a report showed that the U.S. manufacturing sector expanded in September close to market expectations.

In October, the Federal Reserve is expected to close its monthly bond-buying program and then begin raising benchmark interest rates some time in 2015, though the timing of the latter remains up in the air.

Stocks, meanwhile, have advanced on expectations that some time will pass before stimulus programs close and rate hikes begin, especially considering that benchmark interest rates are currently at rock-bottom levels.

Meanwhile across the Atlantic, European Central Bank President Mario Draghi said the bank will keep its monetary policy "accommodative" for as long as needed and use every tool at its disposal to fight deflation, comments that drew applause in global equities markets.

"Monetary policy will remain accommodating for a long time and I can tell you that the Governing Council is unanimous in committing itself to using the tools at its disposal to bring inflation back to just under 2%," Draghi said.

"Interest rates will remain low because they can’t get much lower," he added.

The ECB unexpectedly cut rates to record lows this month in a bid to address slowing inflation.

Leading Dow Jones Industrial Average performers included Dupont, up 2.53%, Wal-Mart Stores, up 1.98%, and UnitedHealth, up 1.90%.

The Dow Jones Industrial Average's worst performers included Chevron, down 0.54%, General Electric, down 0.29%, and Exxon Mobil, down 0.19%.

European indices, meanwhile, ended the day higher.

After the close of European trade, the Euro Stoxx 50 rose 1.19%, France's CAC 40 rose 1.25%, while Germany's DAX 30 rose 1.70%. Meanwhile, in the U.K. the FTSE 100 rose 0.45%.