While you were sleeping: UPDATED Dow bounces to first gain for year

The Dow industrials rallied in the final hour of trading, closing in positive territory for the first time this year and capping a day of wide swings.

The Dow Jones Industrial Average gained 52.12 points, or 0.3%, to 16,398.57, after swinging between gains and losses throughout the session and falling as much as 114 points in intraday trade.

Oil prices remained firmly in negative territory, keeping shares of energy companies lower.

The S&P 500 energy sector index lost 2.1%, as US oil prices slumped 5.3% to $US31.41 a barrel, the lowest level since 2003.

The moves follow a steep selloff in stocks last week that marked the worst start of the year on record for major US indexes.

The S&P 500 rose less than 0.1% to 1923.67, while the Nasdaq Composite declined 0.1% to 4637.99.

"January has certainly been worse than expected so far," Williams Capital Group principal and head equity trader Stephen Carl told Bloomberg.

"You have weak oil and the China overhang, plus some scepticism around how strong economic numbers will continue to be. We're trying to find a trading pattern with no notable economic numbers this morning."

Bearish environment compounded by world tensions
Federal Reserve Bank of Atlanta president Dennis Lockhart said he expects "further rate increases will be justified by economic performance in 2016."

"The downside risks relate mostly to the influence of the rest of the world on our economy," he said in a speech at the Rotary Club of Atlanta.

"Last week we saw a global selloff in stock markets apparently triggered by data from China that fell short of expectations.

"The bearish environment was compounded by tensions between Iran and Saudi Arabia, the bomb test claimed by North Korea, and lower oil prices.

"When such volatility develops, I think it's helpful to look at the real economy of the United States (as opposed to the financial economy) and ask if something is fundamentally wrong.

"Are there serious imbalances that make the broad economy vulnerable to foreign shocks? I don't see that kind of connection in current circumstances."

Yet some are increasingly concerned about the outlook for China, which is dealing with a plunging stockmarket as the country is struggling to stoke its economic engine.

"Beneath all of the financial turbulence there lurks, in my view, a credit crisis," UBS economic adviser George Magnus told Bloomberg. "I fear the worst now."

Meanwhile, a fresh round of US earnings will arrive as Alcoa is set to report its latest quarterly earnings after the market close. Its shares fell 0.9% in afternoon trading.

In Europe, the Stoxx 600 Index ended the session with a 0.3% decline from the previous close. Germany's DAX Index fell 0.3%, France's CAC 40 Index slid 0.5%, while the UK's FTSE 100 Index retreated 0.7%.

UPDATED for Wall St close (10am NZ time)

(BusinessDesk)