The Fed is coordinating its actions, designed to add $40 billion in liquidity, with the European Central Bank, the Bank of England, the Bank of Canada and the Swiss National Bank.
"This is a very bullish development for the markets," said Alan Skrainka, chief market strategist at Edward Jones. "The main problem in credit markets has not been that rates are too high, but that financial institutions have been unwilling to lend. This added liquidity should relieve some of that pressure."
Up 271 points early on, the Dow Jones Industrial Average was more recently up 40.6 points, or 0.3%, to 13,473.4, with 18 of its 30 components trading higher.
AT&T shares , up 5.8%, headed higher for a second day after the telecommunications giant painted a rosier picture of future growth in a meeting with analysts.
Boeing Co. , down 2.6%, was among blue-chip decliners after its downgrade to equal-weight from overweight at Morgan Stanley.
The Dow's financial components shed earlier gains after Bank of America Corp. warned of larger fourth-quarter losses than previously projected.
Bank of America was among those to draw a downgrade by Merrill Lynch, with the broker also cutting its ratings on J.P. Morgan Chase Co. and Wachovia Corp. . .
The S&P 500 rose 8.24 points, or 0.6%, to 1,485.89, while the Nasdaq Composite advanced 21.43 points, or 0.8%, to 2,673.78.
On the New York Mercantile Exchange, crude-oil futures climbed $2.76 to $92.74 a barrel after the government reported a drop in U.S. inventories.
The dollar was mixed, slipping against the euro and pound but surging against the yen, in the wake of the central banks' action. .
On the New York Stock Exchange, 793 million shares were exchanged, while 1.1 billion shares traded on the Nasdaq. Advancing stocks outran those declining on both exchanges, by 3 to 1 on the NYSE and 5 to 4 on the Nasdaq.
Rising trade deficit
Early economic data had the Commerce Department reporting the U.S. trade deficit climbed to three-month highs. .
In a separate report, the Labor Department tallied a 2.7% November rise in import prices.
Asian stocks were mostly lower, with Japan and Hong Kong hurt by Tuesday's steep sell-off of U.S. stocks, which were slammed after the Fed delivered quarter-point cuts to both the Fed funds and discount window rates, less than many market participants had expected. .
Europe stocks shook off early losses after the coordinated central bank action.
By Kate Gibson