North Korea said it was completing plans to fire four intermediate-range missiles over Japan to land near the U.S. Pacific island territory of Guam in an unusually detailed threat that further heightened tensions with the United States.
On Thursday, the Dow Jones index dropped 0.9 percent, or 204,69 points, to 21 844,01.
At 1:09 p.m. ET, the Toronto Stock Exchange's S&P/TSX composite index was down 145 points, or 0.95 per cent, to 15,072.33.
Nasdaq 100 e-minis were down 1 points, or 0.02 percent, on volume of 49,062 contracts.
Investors instead turned to safe-haven assets such as gold, pushing it to a two-month high, and the Japanese yen rose.
Analysts pointed to the harsh threats and sabre rattling from US President Donald Trump, including a message on Wednesday on Twitter boasting the United States' nuclear arsenal was now "more powerful than ever before". Markets in greater China mirrored the slide in global equities. Apple was down 2.3 per cent, weighing most on the index.
Mr Trump's comments sparked a late afternoon selling on Tuesday, with the Dow ending a nine-day streak of closing records.
Safe-haven assets gained following the rising geopolitical tensions.
However, Federal Reserve Bank of New York President William Dudley suggested on Thursday that the central bank was on track to raise interest rates once more as he expects sluggish inflation to rise over the next several months.
"We predicted KOSPI's July support level to be 2,300, but there is a possibility that it will fall below the mark in a couple of months", he said.
Shares of Macy's tumbled 10.2% and Kohl's was down 6% as the companies continued to report a drop in quarterly same-store sales.
Retailers' results are being keenly watched by investors to gauge the companies' strategy to counter No. 1 online retailer Amazon.com's growth.
"Geopolitics splashed cold water on the markets", said J. J. Kinahan, chief strategist at TD Ameritrade.
On the economic front, figures out on inflation, the Producer Price Index, showed wholesale prices falling for the first time in nearly a year. Hong Kong's Hang Seng Index fell 1.22%. It is now on track for its biggest weekly drop since the week before the November 8 US presidential election.
Traders saw the chance of a rate hike in December falling to 40 percent from 42 percent before Friday's data, according to Federal funds futures.
The yield on the benchmark 10-year Treasury note settled at 2.191%, its lowest close since June 26, compared with 2.211% Thursday and 2.269% last Friday.
About 7.5 billion shares changed hands on US exchanges, well above the 6.25 billion average for the last 20 days.
The 30-year bond last rose 5/32 in price to yield 2.8107 per cent, from 2.818 per cent late on Wednesday.
Spot gold added 0.7 per cent to $1,285.70 an ounce.