NEW YORK (AFP) - Wall Street stocks tumbled Wednesday as US oil prices sank to fresh 12-year lows, but an afternoon rally significantly cut the session's losses.

The Dow Jones Industrial Average lost 249.28 points (1.56 per cent) at 15,766.74.

The broad-based S&P 500 fell 22.00 (1.17 per cent) to 1,859.33, while the tech-rich Nasdaq Composite Index dipped 5.26 (0.12 per cent) to 4,471.69.

US markets were seized much of the day with a selling frenzy following deep losses in overseas equity markets and another plunge in oil prices.

But the market shifted in mid-afternoon, briefly taking the Nasdaq into positive territory and sharply cutting losses for the Dow and S&P 500. At its low point, the Dow was down to 15,450.56, a fall of about 3.5 per cent.

"Sellers have been controlling the markets for the last two weeks. As soon as there was some real buying interest coming in, sellers disappeared," said Michael James, managing director of equity trading at Wedbush Securities.

"When emotion controls the direction of the market, you have the potential for significant swings like you had today," he said.