"The escalation of the geopolitical situation between the US 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. Mall owners and hotel operators were among the big laggards.
Gold prices rose while the yen hit an eight-week high against the dollar and made broad gains against other peers, reacting to the political tensions stemming from the Korean Peninsula. The Dow slumped by 1.1%, while the Nasdaq and the S&P 500 tumbled by 1.5% and 1.4%, respectively.
Macy's (M.N) shares closed down 10.2 percent and Kohl's (KSS.N) fell nearly 6 percent as the companies continued to report a drop in quarterly same-store sales, stoking concerns that their turnarounds may still be a long way off. On Monday, the S&P 500 and Dow closed at record highs.
Winners and Losers: Live-events company Live Nation saw its stock climb more than five percent Thursday on news that concert ticket sales jumped 22 percent from a year ago.
On average, the S&P 500 falls 5% or more every 10 weeks and the index falls 10% every 33 weeks, according to data analyzed by AllianceBernstein going back to 1928.
Retailers Wal-Mart (WMT), Home Depot (HD), Target (TGT), Staples (SPLS), and Gap (GPS) are also among the companies due to report their quarterly results next week.
Perrigo PRGO.N surged 17.6 percent after the drugmaker raised its full-year adjusted profit forecast.
NO ALARM: Envision Healthcare was up 4.5% to $57.50 after the ambulatory surgery center company said it will sell its medical transportation business to KKR.
Stocks were extending earlier losses as futures pointed to further losses on Wall Street.
MALL RATS: Several real estate investment trusts that own malls were down.
Gold fell $2.10 to $1,262.60 an ounce. Macerich slid 2.1% to $59.33. Brent crude, the worldwide standard, lost 28 cents to $52.09 a barrel in London.
The pound was down 0.1% against the euro at 1.10. Heating oil fell 1 cent to $1.63 a gallon.
BONDS: Bond prices fell.
Manufacturing production in Jun was flat, as predicted, after falling 0.1% in May, while United Kingdom construction output badly missed forecasts fell 0.1% month on month and rose 0.9% year-on-year.
Canadian Tire Corp Ltd rose 3.4 percent to C$146.65. Britain's FTSE 100 edged up 0.1%.
In a note to investors, Paul Christopher, head global market strategist, and Tracie McMillion, head of global asset allocation, suggest, "the threat of a nuclear weapon is certainly more serious than previous threats, but that threat also may increase the probability of a diplomatic solution". South Korea's Kospi fell 0.2%. Hong Kong's Hang Seng added 0.6 percent.
This article was originally published at 7 a.m.