WALL STREET STEMS BLEEDING...

A collective sigh of relief swept across global trading floors as bargain hunters swooped in to buy Wall Street stocks, stemming a hemorrhage that had been spreading panic among investors.

With Asian and European equity markets plunging on Tuesday, New York stocks started their trading day with another jaw-dropping fall as the Dow index dived nearly three per cent, adding to the previous day's record loss.

But within minutes a fierce battle appeared to be playing out between those betting on further declines, and those who thought that the market correction had gone too far, leading to some wild price gyrations.

After a swing of nearly 1,200 points during the session, the Dow finished solidly higher, tacking on more than 500 points, or 2.3 per cent from Monday's close, to 24,912.77.

"The mood on the floor is relief," said FTN Financial chief economist Chris Low, adding that the Dow's "violent" descent on Monday -- at one point losing 700 points in a few minutes -- would not soon be forgotten.

"It reminds me of the deep ocean sailors I know," Low said. "They love it, but they're also respectful and terrified."

The steep losses in recent days, as well as the report early on Tuesday that the US trade deficit surged 12 per cent in 2017, undercut President Donald Trump's relentless economic cheerleading, as he has been quick to take credit for every new Wall Street record or data point.

Even before an impressive late-session surge, Wall Street's stronger performance helped the main European stock markets off their worst levels. Still, leading bourses in remained deep in the red at the close, with Paris, Frankfurt and London all down more than two per cent.

Earlier, the Nikkei in Japan slumped almost five per cent. Hong Kong lost more than five per cent in its worst day since summer 2015, while Sydney and Singapore each sank three per cent.

"Markets usually grind to the upside, but fall like a rock," said analyst Naeem Aslam at trading firm Thinkmarkets.

"Traders have been looking at the market for the past year moving in one direction which was skewed to the upside.

Now, it's time for the bears to take their revenge."

The selloff striking fear in investors' hearts began last Friday when bright US non-farm payrolls data sparked concern that inflation will reappear this year -- and that the Federal Reserve will in response raise borrowing costs more quickly than anticipated.

Many on Wall Street remain optimistic about the markets.

Goldman Sachs on Tuesday reaffirmed its year-end target of 2,850 points for the S&P 500.