USA equities steepened their losses late in the session after President Donald Trump said his earlier warnings to North Korea may not have been tough enough.
"Markets are looking for any reason at all for a reset".
Investors have been jittery about North Korea since Tuesday when Trump said any threats from Pyongyang would be "met with fire and fury like the world has never seen".
"The people of this country should be very comfortable, and I will tell you this: If North Korea does anything in terms of even thinking about attack, of anybody that we love or we represent or our allies or us, they can be very, very nervous", Trump said.
North Korea has made threats against the USA for years, but a recent military intelligence analysis found the country has developed the ability to build a small nuclear warhead that can reach the United States.
Until this week, the equity market had managed to shake off negative news, including previous saber-rattling over North Korea and failures in Washington to pass high-profile bills, such as repealing and replacing Obamacare.
North Korea responded with a statement by its official KCNA news agency claiming Trump is "driving" the Korean peninsula to the "brink of a nuclear war". "Hopefully Kim Jong Un will find another path!"
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A weaker-than-expected July consumer price data also supported the recovery.
Nvidia's quarterly revenue in its data center and automotive businesses missed estimates, dragging the chipmaker's shares down 5.43 percent. Germany's DAX fared better, trading only 0.2 percent lower at 11,989. Both the core and headline rates are expected to have risen by 0.2 percent during July. ANZ fell 1.9 percent, Commonwealth shed 0.7 percent and Westpac declined 1.3 percent after RBA Governor Philip Lowe said the central bank is prepared to be patient on rates for quite some time.
The Dow Jones Industrial Average fell 162.59 points, or 0.74 percent, to 21,886.11, the S&P 500 lost 30.54 points, or 1.23 percent, to 2,443.48 and the Nasdaq Composite dropped 116.67 points, or 1.84 percent, to 6,235.66. That conflict will continue to weigh on stocks, analysts believe. The Japanese markets were closed for a holiday. Hong Kong's Hang Seng Index plunged by 2 percent, while South Korea's Kospi Index slumped by 1.7 percent.
The major European markets are also extending a recent move to the downside.
The Toronto Stock Exchange's S&P/TSX composite index fell 143.08 points to 15,074.25, with almost all of its sectors moving lower. Gold hit a two-month high of $1,278 an ounce amid the nervousness.
On the currency front, the US dollar is trading at 108.82 yen compared to the 109.20 yen it fetched at the close of NY trading on Thursday.
CURRENCIES: The euro slipped 0.1 percent to $1.1176 while the dollar was steady at 109.20 yen.