MARKET CLOSE: Stocks on Wall Street finished higher after a late rally in a session marked by a lack of direction.

Stocks on Wall Street fell the most in nearly three months after a triple whammy of US banking restrictions proposals, continuing concerns over Greek debt and worry over China putting the brakes on economic growth.

Commodities fell with sharemarkets, while the US dollar and the euro also remained under pressure.

On Wall Street, the main focus was on financial stocks, which were hit hard after President Obama proposed the most extensive curbs on market speculation by banks since the outbreak of the recent financial crisis.

The New Zealand sharemarket fell when it started trading this morning after Wall Street's 100-point fall at the end of trading last week.

The Dow Jones Industrial Average had its steepest one-day drop since November after JP Morgan Chase reported deep fourth-quarter loan losses.

Prominent among companies losing ground early today in this country was insurer and investment manager Tower, which fell 10c or 4.6% to $2.06, although volume was low.

Stocks on Wall Street dropped the most in one day so far this year as financial shares pummeted in the wake of a weaker than expected result from JP Morgan Chase.

In other markets, European and Canadian  sharemarkets also fell, as did oil and gold, while the US dollar and yen benefited from risk-averse traders.

JP Morgan's fourth-quarter earnings quadrupled, exceeding forecasts, but revenue was below analysts' and the outlook was glum.

Financial stocks led stocks on Wall Street to their first drop in five days after credit-card defauls rose at most major issuers in November.

New economic data showing rising wholesale prices and deteriorating manufacturing conditions also weighed on the market, though energy stocks were a bright spot.

Big oil producers were helped by a rally in crude, which broke a nine-day losing streak.

The blue chip stock index on Wall Street closed off its 14-month high set on Tuesday as new uncertainties emerged to spook investors.

Proposed changes in derivatives rules are likely to reduce earnings of banks such as JP Morgan Chase as most derivatives trades are moved to exchanges. UBS analysts predicted that capital markets' seasonal slowing could come earlier this year, and cut their fourth-quarter earnings target for all financial stocks.