The market had bounced off its earlier session lows after a rally in US futures prices.
Leading the rebound was respiratory products maker Fisher and Paykel Healthcare, which rallied by 77 cents or 2.6 per cent to $30.12.
Over the weekend, the Government put New Zealand into the "red" setting under the traffic light system due to the Omicron variant of Covid-19 being discovered in the community.
Although the red light setting is not as restrictive as a lockdown, Omicron has created more uncertainty for the economy.
Salt Funds managing director Matt Goodson said the pullback in local and world markets was broadly reflective of the US Federal Reserve's need to tighten monetary conditions quicker than the market had anticipated.
"It's a big deal that the local market has, in the short term, tanked and has come back by more than 10 per cent," Goodson said.
"But it's just one definition of a correction, rather than everyone sitting around and saying 'oh my god, it's a correction'."
"It's not a major topic of conversation," he said.
"The selling started when everyone realised that the US Federal Reserve is going to have to tighten, and central banks generally are going to have to tighten, by more than we had initially thought," he said.
Selling in the US had initially hit the low-quality tech stocks.
"The selling has broadened over the last few days to be something more general," Goodson said.
The Omicron outbreak in New Zealand and around the world is being seen as just another bearish element, adding to fears about inflation, interest rates and rising geopolitical risk.
America's Nasdaq Composite index fell 7.6 per cent last week, its biggest slide since the Coronavirus pandemic hit in March 2020.
Harbour Asset Management portfolio manager Shane Solly equity positions have shifted quickly in response to quite hawkish central bank commentary.
"Then we have got the impact of Omicron and of course how the geopolitical risk with tensions over Russia and Ukraine.
"So there are a lot of things that are weighing on sentiment," he said.
Solly said he expected the local market to be relatively resilient because of its high proportion of defensive stocks.
It's been a poor start to the year for most share markets, with America's S&P500 index falling by 7.7 per cent and Australia's S&P/ASX200 index dropping 3.6 per cent.
"The fear has gone from the fear of missing out to the fear of losing money," Solly said.
In the foreign exchange market, the New Zealand dollar was only slightly weaker at just US73c.
"The move into red hasn't had any noticeable impact on the Kiwi," ANZ market strategist David Croy said.
"I'm not surprised by that and I think it was very much in the price," Croy said.
