U.S. factory production data showed that manufacturing was strong in August despite a slowdown due to closures related to severe storms and the ongoing microchip shortage.
Earlier in the day U.S. import prices for August declined for the first time in 10 months. That followed Tuesday data from the U.S. Labor Department showing that inflation cooled last month and may have peaked.
U.S. oil rose by more than $2 on Wednesday after stockpiles fell last week to their lowest since September 2019.
The MSCI All Country World Index gained 0.26%, and all three of the major U.S. stock indexes closed higher.
However, the pan-European STOXX 600 index closed down 0.80% after U.K. data showed that inflation hit a more than nine-year high last month.
Investors are awaiting the U.S. Federal Open Market Committee's monetary policy meeting next week for what the Fed will announce regarding its bond-buying program and when it will begin tapering.
"Risk markets in Europe and America are trading in a subdued fashion ahead of next week's FOMC meeting, with economic data failing to boost conviction in the reflation trade at the moment," ANZ analysts wrote.
The Dow Jones Industrial Average rose 236.82 points, or 0.68%, the S&P 500 gained 37.65 points, or 0.85%, and the Nasdaq Composite added 123.77 points, or 0.82%.
Possible increases to the U.S. corporate tax rate remain important in the background, and one bank estimated that raising the corporate tax to 25% could shave 5% off S&P500 earnings in 2022.
"We still have a very fragile market, especially if we get some type of tapering from the Federal Reserve," said David Wagner, portfolio manager at Aptus Capital Advisors. "Any material change to tax policy can create a more volatile market."
Data out of China showed that factory and retail output and sales growth hit one-year lows in August, as fresh COVID-19 outbreaks and supply disruptions pointed to a possible economic slowdown on the mainland.
The dollar was last down 0.122% mainly due to a sharp slide in USD/JPY's, which broke below important supports as safe-haven buying bolstered the yen in particular.
The yield on 10-year Treasury notes was up 2.3 basis points to 1.302% after earlier touching a three-week low of 1.26%.
U.S. crude settled up 3.1% at $72.61 a barrel, and Brent ended 2.5% higher at $75.46 a barrel.
Spot gold dropped 0.8% to $1,790.56 an ounce. U.S. gold futures fell 0.68% to $1,792.40 an ounce. [GOL/]
(Reporting by Elizabeth Dilts Marshall in New York, Huw Jones in London; Editing by Will Dunham, Marguerita Choy and Sonya Hepinstall)
By Elizabeth Dilts Marshall