The New Zealand sharemarket has fallen sharply, taking its lead from an overnight sell-off on Wall Street that saw investor concerns about slumping commodity prices and the global economy push the S&P 500 index into correction territory.

The S&P/NZX 50 had fallen 1.06 per cent just before midday, led by a 4.4 per cent drop by A2 milk and a 3.9 per cent fall in Coats Group shares.

Auckland Airport and Xero shares had fallen 2.4 per cent and 2.2 per cent, respectively.

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New Zealand's benchmark index, which closed at a record on December 31, has now fallen 3.8 per cent in the year to date.

"At this time of the year we don't really see much in the way of domestic news, so investors are really focused on what's happening overseas," said Grant Williamson, of Christchurch sharebrokers Hamilton Hindin Greene. "It was obviously a bad day on Wall Street overnight, losing over 2 per cent."

Australia's S&P/ASX 200 was down 2.4 per cent at midday, continuing a sell-off that has seen the Australian sharemarket have its worst start to a year on record.

Meanwhile, a broad downturn in US stocks on another volatile day for crude oil prices knocked the Standard & Poor's 500 index down 10 per cent from its November peak.

That's known as a correction on Wall Street, and it's the second time in less than five months for the S&P 500 index, which is regarded as the bellwether for the stock market.

The Dow Jones industrial average also tumbled, losing more than 300 points before closing within 25 points of its own correction level.

The rocky start to the year reflects mounting worries on Wall Street about a slowdown in the global economy, plunging oil prices and the implications for US companies.

It also deepens the pain for many investors after a flat year of returns for the US stock market last year.

Outside of the commodity price slump, Williamson said other indicators, such as US economic growth rates, didn't look so bad.

"Investors do seem to be bit nervous and jittery at the moment," he said. "I feel the fundamentals don't look too bad at the moment and at some stage investors will look at this correction as a buying opportunity."

Williamson said New Zealand's corporate reporting season, which kicks off next month, would have a large bearing on the performance of the local market.

The S&P 500 index is now down 7.5 per cent this year, while the Dow is off 7.3 per cent. The Nasdaq is deeper in the red, down 9.6 per cent.

Whether or not we're headed into a recession. That's the debate. Are we gaining the momentum in the economy to justify the valuation in the market?

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The Russell 2000, which is comprised of small-company stocks, is now down 20 per cent from its June peak.

That big a plunge is defined as a bear market.

"At the very core of this there's a bull-bear debate," said Quincy Krosby, market strategist at Prudential Financial. "Whether or not we're headed into a recession. That's the debate. Are we gaining the momentum in the economy to justify the valuation in the market?"

Energy and consumer stocks bore the brunt of the selling on Wednesday.

The price of US crude oil closed slightly higher, but remains near US$30 a barrel, a level that investors fear could force many oil and gas company to go bankrupt. Brent crude, the international standard, fell 2 per cent.

Some of the biggest winners from last year, such as Netflix and Amazon, both of which doubled in value in 2015, also fell sharply.

"The momentum names that drove this market higher have just been clobbered," Krosby said.

All told, the Dow lost 364.81 points, or 2.2 per cent, to 16,151.41. The S&P 500 index fell 48.40 points, or 2.5 per cent, to 1,890.28. It was the worst day for the index since September 28.

The Nasdaq slid 159.85 points, or 3.4 per cent, to 4,526.06.

All the sectors in the S&P 500 index ended sharply lower, with consumer discretionary stocks faring the worst, down 3.4 per cent.

What is a stock market correction?

• A "correction" is a Wall Street term for when an index like the S&P 500 or the Nasdaq -- or an individual stock -- falls 10 per cent from its most-recent high. The S&P 500, the index that investors pay most attention to, fell 48 points Wednesday to 1,890, which is 10.4 per cent below a recent high of 2,109 set on November 3 and 11.3 per cent from its record high of 2,130 set on May 21.

• A correction is not the same as a bear market, which is defined as when a stock index or individual stock falls 20 per cent from its most-recent peak.

- Additional reporting AP