In currencies, the yen rose 0.8 percent versus the greenback at 109.2 per dollar JPY=, the strongest level for the Japanese currency since mid June.
Shares of Snapchat parent Snap Inc.(SNAP) slid 11% a day after the company's earnings missed forecasts (http://www.marketwatch.com/story/snap-ceos-promise-cant-overcome-declining-ad-rates-stock-heads-toward-new-lows-after-earnings-2017-08-10), and the social-messaging company disclosed that average ad prices fell in the second quarter.
The Dow Jones Industrial Average fell 0.9 percent to end at 21,844.01, the only close below 22,000 since breaking through that level for the first time August 2.
Tokyo's Nikkei index had dropped 1.3% by the time European stock markets opened on Wednesday morning, with similar falls on the German and French bourses.
In his latest warning to North Korea, US President Donald Trump said on Friday military solutions were "fully in place" and referred to American weapons as being "locked and loaded" should the nuclear-armed nation act "unwisely".
"The war of words between the leaders of the USA and North Korea continues to dominate investor sentiment", said Forex.com technical analyst Fawad Razaqzada. With the sell-off on the day, the Nasdaq and the S&P 500 fell to their lowest closing levels in a month. "Risk aversion is still very much a concern for markets", said Shaun Osborne, chief currency strategist at Scotiabank in Toronto.
Many world stock markets have hit record or multi-year highs in recent weeks, leaving them vulnerable to a selloff, and the tensions over North Korea proved to be the trigger.
The headlines about North Korea served as a spark to jolt investors out of complacency on the heels of an extended period of calm in the market, said McClellan who shared the following chart in a report.
Macy's shares closed down 10.2 percent and Kohl's 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. Core prices had also been expected to climb by 0.2 percent.
Disappointing US inflation and jobs data have not helped the dollar.
The data comes amid tepid inflation that has remained below the Fed's 2% target, despite low unemployment.
And in bond markets, 10-year US Treasuries and Germany's ultra-safe government bonds, known as Bunds, were trading at their highest prices since June.
US crude shed 16 cents to $49.01 a barrel, while Brent crude fell 22 cents to $51.92 a barrel.
The utilities index, often seen as a bond proxy because of its companies' slow reliable growth and high dividends, was the only S&P sector that ended the day up, showing a 0.25 percent gain.
The market's backstop safety asset, gold, edged up to its latest two-month high of $1,288 an ounce.