All three major stock indexes closed the day up more than 4%. The Dow's 489-point gain is the largest of 2011 and the best percentage gain since March 2009. Still, despite today's run-up, the Nasdaq and S&P 500 are down for the year.
The central banks' coordinated market intervention gave investors hope that world leaders could take necessary steps to avoid a credit crunch or market paralysis stemming from Europe's sovereign debt crisis.
"It's the first time we've seen this type of global coordination since November 2008," said Michael James, a senior equity trader at Wedbush Morgan. "The degree of coordination sends a message to the markets that global leaders are going to do whatever they need to do to instill confidence in the markets."
The Dow Jones industrial average (INDU) closed the day up 490 points, or 4.2%, and ahead 0.6% for the month. The S&P 500 (SPX) added 52 points, or 4.3%, but stayed down 0.5% for the month. The Nasdaq (COMP) composite moved up 105 points, or 4.2%, but still shed 2.3% in November.
The Federal Reserve, along with five other central banks including the European Central Bank and the Central Bank of Canada, announced a joint action to lower interest rates on dollar liquidity swaps -- making it cheaper for banks around the world to trade in U.S. dollars.
The move is an attempt to "ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," the banks said in a statement.
The dollar gained against the euro, the British pound and the Japanese yen.
Oil for January delivery gained 43 cents to $100.22 a barrel.
Gold futures for December delivery moved up $30.50 to $1,744.20 an ounce.
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