US stock markets recovered on Tuesday from heavy losses after being rattled by concerns over Europe's deepening debt crisis, tensions on the Korean peninsula and the prospect of a US banking overhaul.

The blue-chip Dow Jones Industrial Average recouped losses of over 250 points to finish just above the symbolic 10 000 point mark, but still in the red.

Earlier in the day concerns about the health of the eurozone and tensions between North and South Korea sent investors fleeing from the stock market into safe-haven investments such as US government bonds.

The Dow closed down just 22.82 points (0.23 percent) at 10 043.75.

The tech-rich Nasdaq index lost 2.60 points, or 0.12 percent, at 2210.95.

But the broad-based S&P 500 staged a dramatic comeback, closing 0.38 points or 0.04 percent higher at 1074.03.

At one point all 30 of the Dow's stocks were down, with shares in consumer and financial firms hit hardest.

Wall Street "again took its cues from overseas today, with the Korean peninsula and the eurozone sharing the global spotlight," said Andrea Kramer of Schaeffers Investment Research.

"A valiant eleventh-hour blitz by the bulls kept the Dow Jones Industrial Average atop round-number support, and put the S&P 500 Index just north of breakeven."

Reports that derivatives curbs — outlined in draft US legislation — may be eased helped financial firms to recover ground, according to Patrick O'Hare of Briefing.com.

Goldman Sachs shares soared over four percent, followed by Wells Fargo, JPmorgan and Bank of America, all of which finished in positive territory.

There was also some positive US economic news for investors to chew.

Consumer confidence improved for the third straight month in May, according to a survey released by the Conference Board Tuesday, as Americans saw a rosier outlook for jobs and businesses.

The poll asks 5000 US households a series of questions about their level of confidence in the economy. The results produce an index where 100 points signifies total confidence and zero represents absolute pessimism.

The research firm's consumer confidence index for May stood at 63.3 points, up from a revised 57.7 percent last month.

"The improvement has been fueled primarily by growing optimism about business and labor market conditions. Income expectations, however, remain downbeat," said Lynn Franco, the head of the board's consumer research department.

Bond prices rose. The yield on the 10-year US Treasury bond fell to 3.158 percent from 3.227 percent on Monday and that on the 30-year bond dropped to 4.057 percent from 4.104 percent.