The overall financials group, which accounts for roughly a third of the index slipped 0.9 per cent. Heating oil fell 1 cent to $1.63 a gallon.
He said:"Financial markets are already taking precautions against an escalation with haven buying happening in the Swiss franc, gold and the Japanese yen, though why anyone would want to buy a currency which is on the front line of a possible conflict is beyond me".
"The latest threats over North Korea have finally escalated to the point where market has been obliged to react", Ric Spooner, chief market analyst at CMC Markets, wrote in a note. Most Americans are hoping the tough talk from President Trump and North Korean leader Kim Jong Un is just that.
The euro inched down 0.1 percent to $1.1744 while the dollar index against a basket of major currencies added 0.1 percent to 93.620.
The Korean won also continued to skid, sliding 0.4 per cent to 1,146.2, below its 200-day moving average. The Nasdaq composite gained 39 points, or 0.6 percent, to 6,255. Cracks are showing in what has been a virtually non-stop USA equity rally after a rapid escalation of tension between North Korea and the United States this week.
"While the US President insists on ramping up the war of words, there is a decreasing chance of any diplomatic solution", Carnell said.
Trump's second warning, however, has shaken markets that have been largely resilient this year, swatting away a slew of risks.
He added that while current institutional allocations are at their lowest relative to historic levels, should they start re-allocating, "a big move in global gold prices will inevitably ensue". Small-company stocks fell more than the rest of the market. Still, all three gauges are within 5 percentage points of record levels.
Appearing on CNN's The Situation Room, Risch called the situation "dangerous" but wouldn't reject President Trump's threat to unleash "power the likes of which this world has never seen before". Investors welcomed new data showing US inflation at the consumer level inched higher last month, suggesting that the Federal Reserve may be less likely to raise interest rates next month.
Canada's main stock index fell on Thursday despite a slew of better-than-expected quarterly results, as investors sought refuge in safe-haven assets amid rising tensions between the United States and North Korea.
Tokyo's Nikkei 225 share index closed down 1.3 per cent at its lowest since June 1 as the strong yen hit exporters, while South Korea's KOSPI index fell 1.1 per cent to seven-week lows. It was down 0.2 per cent at 108.96 yen, after retreating 0.7 per cent on Thursday.
"We would now be careful with a whiff of risk aversion in the air and, by extension, also stay away from shorts in the rates market", RBC's global macro strategist Peter Schaffrik said.
In commodities trading, U.S. crude oil was wallowing around $49 to the barrel amid speculation that a predicted gain in American output will offset OPEC-led efforts to trim a global glut.
CURRENCIES: The euro was down 0.1 percent at $1.175 while the dollar fell 0.6 percent to 109.68 yen.
Sydney was a rare bright spot in Asia-Pacific with stocks closing 0.4 percent up as Australia's biggest bank posted record annual profits.
Prices for bonds and gold headed higher. Only 3 of the 30 stocks in the Dow finished the day with a gain: IBM, Coca-Cola and McDonald's.
USA crude futures extended losses from Thursday when they tumbled 2 per cent on fears of slowing demand and lingering concerns over a global oversupply.