NEW YORK – A joint effort by five major central banks to support Europe’s financial system set off a rally in U.S. stocks Thursday. Gold plunged and Treasury yields rose as traders sold the safest investments. Markets in Europe soared.

The European Central Bank, the U.S. Federal Reserve and three other central banks said Thursday they would provide European banks with unlimited dollar loans. The aim is to fend off worries that the banks could be weakened by their holdings of government bonds from Greece and other struggling European countries.

“It’s a pretty powerful action,” said Brian Gendreau, senior investment strategist at Cetera Financial Group. “And it’s another piece of news that leads you to think the crisis in Europe could be on the road to resolution.”

The Dow Jones industrial average rose 186.45 points, or 1.7 percent, to close at 11,433.18.

The Standard & Poor’s 500 index rose 20.43 points, 1.7 percent, to 1,209.11. The index has jumped 4.8 percent this week but is still 10 points short of where it started the month.

Worries that European banks would have difficulty borrowing have hung over markets in recent weeks. It’s a key element in the European debt crisis, rooted in the fear that cash-strapped governments in Greece and Italy won’t pay back their debts.

European banks hold large amounts of debt issued by Greece and Italy, which they use as collateral to borrow dollars. The danger is that banks could lose their ability to raise money when other lenders won’t take the collateral.

Europe’s main stock markets jumped on the news. Germany’s DAX and France’s CAC-40 gained 3 percent. The euro rose against the dollar as confidence in Europe’s currency increased.

Gold plunged $45, or 2.5 percent, to settle at $1,781 an ounce. Treasury prices fell, pushing their yields up. The yield on the 10-year Treasury note, which is used to set interest rates on a wide variety of loans, rose to 2.08 percent.

Daniel Alpert, managing partner at Westwood Capital in New York, said the stock market has been overreacting to Europe’s debt crisis, swinging in response to each new development.

“Every time there’s news out of Europe that’s not bad, the market reacts positively, and that’s occurring on almost a nightly basis,” he said. “You’d think the U.S. economy might be part of what the market trades on, but the fact of the matter is, today and recently, it’s all been about Europe.”