Shares in New York ended all but flat on Tuesday, despite falls of some 3% earlier in the session.
The Dow Jones closed barely changed - down 0.2% at 10,043 as nerves stabilised towards the end of the session.
Earlier, European stock markets closed sharply lower after a day of continued fears about eurozone debt problems.
The FTSE 100 index in London closed down by 2.54% to an eight-month low of 4,940.68 points.
Germany's Dax index was 2.34% lower, while in France the Cac-40 fell 2.9%.
There was no strong evident reason for the turnaround in US stock values.
Earlier, Asian markets also saw sharp falls. As well as eurozone worries, stocks in South Korea and Japan had been affected as North Korea reportedly went on to military alert.
North Korea later announced it was severing ties with South Korea.
In London, the FTSE 100 has now fallen by more than 10% in little more than a month after hitting a 22-month high in April - it stands at its lowest level since 7 September 2009.
'Toxic cocktail'The renewed concerns about eurozone debt follow Monday's strongly-worded comments from the International Monetary Fund that the Spanish economy needs comprehensive and far-reaching reform.
That added to investors' worries over the weekend rescue of Spanish bank Cajasur by the Bank of Spain, only the second time the central bank has saved a regional lender.
Amid concerns over solvency in the sector, and in the wake of the Cajasur rescue, four Spanish savings banks then announced plans to merge.
Gavin Hewitt BBC Europe editorWill these [government budget] cuts reduce demand and so make cutting deficits even harder? There is a risk here.
Cajastur, Caja de Ahorros del Mediterraneo, Caja Extremadura and Caja Cantabria said they had reached agreement to form a group that would "strengthen solvency and assets of the participating banks".
"There's never been any mystery about the excessive exposure of Spain's banks to a bloated property market," said BBC business editor Robert Peston.
"The mystery has been how its banks avoided crippling losses on this exposure - although that increasingly looks like pain postponed rather than avoided.
"Or, at least, that's what today's retreat in share prices across Europe is saying, with bank shares falling especially sharply," he added.
These concerns have lead investors to seek "safe havens" for their money. German government bonds - or Bunds - are currently seen as one such place - the ten-year bund yield sank to a record low of 2.55%.
The yield is the interest rate an investor receives on a bond. If it is low in comparison to other governments' bonds, it indicates investors have high trust that it will be paid back and are prepared to accept the lower interest in return for that certainty.
Weak euro
| €1 buys | change | % |
| 1.2326 | -0.0020 | -0.16 |
A strong dollar is another traditional safe haven.
The euro and the pound both weakened against the US currency.
The euro fell by 0.8% to $1.228. Against the pound the euro was trading at £0.855, making £1 worth 1.169 euros.
The single currency has fallen in value by almost a fifth against the dollar in the last six months.
The continued weakness of the euro is a concern, with investors dumping the currency amid fears that debts will cause defaults by weaker countries in the European Union.
The single currency has fallen in value by almost a fifth against the dollar in the last six months.
'Sluggish recovery'On Tuesday, the European Union Economy Commissioner, Olli Rehn, warned that governments needed to make major reforms to boost growth.
| value | change | % |
| 5046.26 | +105.58 | +2.14 |
"The big risk is that once the recovery gets more robust, we sit idly in self-complacency and forget the structural reforms.
"That would lead us to a sluggish recovery - or even a lost decade," he said in a speech at the Brussels Economic Forum.
He said the reforms needed for each European country varied, but he called for the opening up of national markets.
Countries such as Greece, at the centre of fears about the eurozone economy, have regularly ignored EU calls to liberalise markets.
Another nation which has ignored calls to open its markets is Italy, which reveal an austerity budget late on Tuesday involving 24 billion euros (£20bn; $28bn) worth of cuts over 2011-2012.
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