Energy stocks also fell along with the price of crude oil. It has been more than a year since the last 5% downdraft in stocks and more than 76 weeks since the stock market suffered a 10% loss. The verbal escalation has been further fuelled on Friday by president Donald Trump, who has warned that if the north Korean leader attacked Guam, Pacific island and american territory, he " would regret ".
"What has changed this time is that the scary threats and war of words between the USA and North Korea have intensified to the point that markets can't ignore it", said Shane Oliver, head of investment strategy at AMP Capital in Sydney. The expanded index S&P 500 rose 0.1 % to 2441,32 points.
The Nasdaq composite lost 13.31 points, or 0.2 percent, to 6,370.46. The Russell 2000 index of smaller-company stocks gave up 9 points, or 0.7 percent, to 1,400.
Bond prices were little changed. In Asia, several indexes closed lower overnight.
But despite the largest percentage drop in over a month on a global equities index, US equities ended only slightly lower as healthy corporate earnings and a recent string of strong economic data enticed investors into beaten-down stocks. And Blue Apron shares dipped after its first earnings report as a public company.
Avis Budget Group slumped 9.9 percent after the vehicle rental company cut its guidance following a weak second quarter.
Haeling said the weakness this week likely also indicates investor concern at lofty stock valuations after a series of Wall Street records in recent weeks.
On Friday, shares in JC Penney sank more than 16% after the retailer reported weaker than expected sales.
Traders snapped up shares in companies that delivered strong quarterly results.
The technology sector was the S&P's biggest drag with a 2.2 percent drop.
Health care equipment and services company Henry Schein declined amid a broader slide by health care stocks.
USA crude was down 0.9 percent at $48.16 per barrel, on track for a weekly loss of 2.9 percent.
The VIX closed 1.4 percent higher but at the lowest level of the day at 11.11, after rising as high as 12.63. Meanwhile, after jumping $10.80 to $1,290.10 an ounce in the previous session, gold futures are climbing $6.50 to $1,296.60 an ounce. In other precious metals, silver surged 1.7% to $17.20 an ounce after hitting $17.24, its highest since June 14.
The dollar index, which measures the U.S. currency against a basket of major peers, slipped 0.1 percent as U.S. Treasury yields fell. The euro rose to $1.1812 from $1.1774.
Markets overseas were mixed Tuesday.
Sterling was last trading at $1.3006, up 0.02 percent on the day.
South Korea's won dropped 0.9 percent against the US dollar to its lowest close since July 13.
In Asia, markets were mostly lower after disappointing Chinese trade data. South Korea's Kospi declined 1.7% Friday, putting its weekly drop at 3.2% - its largest since June 2016.