Stocks extended their sharp gains across the board Wednesday after global central banks announced a coordinated plan to support the global financial system, a handful of better-than-expected economic news and as China said it would loosen monetary policy by cutting banks' reserve requirements.

The Dow Jones Industrial Average briefly spiked more than 400 points, led by Caterpillar [CAT  96.24    5.70  (+6.3%)   ] and Cisco [CSCO  18.68    1.00  (+5.66%)   ], on track for its third consecutive gain.

The blue-chip index is back in positive territory for 2011.

The S&P 500 and the Nasdaq also jumped sharply. The CBOE Volatility Index, widely considered the best gauge of fear in the market, tumbled to trade below 28.

The move is designed to "enhance their capacity to provide liquidity support to the global financial system."

“The markets rallied with the news, but if you stop and think about it, you have to realize what kind of danger the world is in for all the central banks to get together and save Europe,” said Alan Valdes, director of floor operations and VP of trading at DME Securities. “It makes you wonder what will happen in two or three days...the market moves so quickly with the news.”