Watling was bowled by Shannon Gabriel for 65 in the final over before the break, while pace bowler Trent Boult was unbeaten on 38, having added 58 runs for the final wicket at the Basin Reserve.
Play was delayed for 75 minutes after persistent rain failed to clear and the hosts resumed on 307 for six, with Tim Southee and Watling wasting no time in getting re-established.
The pair took 12 runs off the opening over from Tino Best, who was immediately replaced by Darren Sammy.
The West Indies captain made the early breakthrough when Southee, who had been willing to go after anything short, lofted a pull to deep square leg where Darren Bravo took a comfortable catch to dismiss the pace bowler for 21.
Watling and Ish Sodhi added 49 runs before the tall leg-spinner was caught by wicketkeeper Denesh Ramdin for 27 off Best before Neil Wagner was out for a duck, well caught by Sammy at second slip to put him on a hat-trick.
Boult saw off the hat-trick delivery, and the two late wickets flattered Best's figures of four for 110. The fast bowler continued to struggle with his length, bowling too short and also dropped two relatively easy catches in the outfield.
Ross Taylor had anchored New Zealand's innings on the first day, scoring his 10th test century and surpassing 4,000 career runs.
Taylor, who scored a career-best 217 not out in the drawn first test at University Oval in Dunedin, was caught at deep backward point for 129 shortly before the close on Wednesday.
(Editing by Ian Ransom)
