On Thursday, in response to North Korea's threat to fire missiles at American targets in the Pacific, President Trump said that if Pyongyang "does something in Guam, it will be an event the likes of which nobody has seen before - what will happen in North Korea".
Still, the S&P and the Dow were on track to post their biggest weekly loss in about five months and the Nasdaq on course to post its biggest weekly fall in about six weeks.
"What has changed this time is that the scary threats and war of words between the U.S. 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, as quoted by Reuters. The Dow Jones industrial average slid 204.69 points to 21,844.01, just shy of its low point for the day.
Meanwhile, the Russell 2000 index of small-cap stocks finished out the week 2.7% lower, its biggest one-week decline since February 2016.
A Labor Department report showed its producer price index posted a surprise drop in July, down 0.1% for the largest slide in nearly a year.
Helping offset the geopolitical tensions was weaker-than-expected consumer price data for July, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year. "Are you going to raise rates in this environment?" Trump warned Friday that "military solutions are now fully in place". "Hopefully Kim Jong Un will find another path!"
In Europe, the pan-continental STOXX 600 index fell 0.9 per cent, with falls deepening after a vehicle rammed a group of soldiers in Paris, injuring six, in what officials said was a suspected terrorist attack.
Computer hardware stocks rebounded following recent weakness, with the NYSE Arca Computer Hardware Index climbing by 1.4%.
The technology sector was the S&P's biggest drag with a 2.2 percent drop.
The rhetoric, which began late Tuesday and continued into Friday, interrupted stocks' march higher and cracked the calm that has enveloped the market for months. Hong Kong slumped 2.04 per cent, Shanghai slipped 1.63 per cent, Korea shed 1.69 per cent, Jakarta fell 1.03 per cent. Singapore shares also ended in negative territory as increasingly bellicose talk between the United States and North Korea prompted investors to take money off the table, while traders trimmed positions ahead of the weekend.
Asian markets swooned from the opening bell, and closed in the red.
The major European also saw further downside on the day.
U.K.'s FTSE 100, the German DAX and the French CAC 40 all dropped more than 2.3% this week. The Treasury yield us 10-year fell to 2,201 % vs. 2,248 % Wednesday night and one of the warrants to 30 years 2,778 %, compared with 2,824 %. On Thursday, fellow newly public company Blue Apron Holdings lost 18% after the meal-kit maker reported rising costs amid increased competition.