On Thursday, in response to North Korea's threat to fire missiles at American targets in the Pacific, President Trump said that if Pyongyang "does something in Guam, it will be an event the likes of which nobody has seen before - what will happen in North Korea". He said that North Korea "can be very very nervous" if it acts on either the USA or its allies, and warned that "things will happen to them like they never thought possible".
On Thursday, US President Donald Trump said his earlier threat to unleash "fire and fury" on North Korea "maybe wasn't tough enough".
"The escalation of the geopolitical situation between the USA and North Korea is beginning to rattle investors' nerves as was witnessed in the VIX index yesterday", said Peter Cardillo, chief market economist at First Standard Financial. "Hopefully Kim Jong Un will find another path!"
On the economic front, figures out on inflation, the Producer Price Index, showed wholesale prices falling for the first time in nearly a year. Yields fall when bond prices rise.
The Labor Department said its consumer price index inched up by 0.1 percent in July after coming in unchanged in June.
Strong gains in NY, where the Dow saw repeated record highs up until three day ago, had kept investor optimism high when news of the conflict first broke, Currie said.
Adding to the modest losses posted in the two previous sessions, stocks moved sharply lower over the course of the trading day on Thursday.
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The S&P was, however, on track to post its biggest weekly loss in about five months and the Dow on course to record its biggest weekly fall in almost four months.
The Dow Jones Industrial Average fell 0.9 percent to end at 21,844.01, the only close below 22,000 since breaking through that level for the first time August 2.
The rhetoric, which began late Tuesday and continued into Friday, interrupted stocks' march higher and cracked the calm that has enveloped the market for months. Hong Kong's Hang Seng Index plunged by 2 percent, while South Korea's Kospi Index slumped by 1.7 percent.
U.K.'s FTSE 100, the German DAX and the French CAC 40 all dropped more than 2.3% this week.
"Despite Brent Crude (oil) pushing above $53 per barrel.there was a sea of red in the commodity sector", said analyst Connor Campbell from Spreadex.
The Canadian dollar was trading at an average price of 78.67 cents US, down 0.04 of a USA cent.
On the currency markets, the pound was up 0.03% against the dollar at $1.2981 but down 0.23% against the euro at 1.0999 euros.