All three major stock indexes dropped 0.2 per cent at the close, with the Dow Jones Industrial Average finishing at 22,085.34, halting a almost two-week run of closing records.
Nasdaq 100 e-minis were down 39.75 points, or 0.67 percent, on volume of 53,600 contracts.
KEEPING SCORE: Tokyo's Nikkei 225 tumbled 1.3 percent to 19,737.59 points and Seoul's Kospi fell 0.7 percent to 2,378.56.
The back-and-forth came on the heels of reports the U.S. intelligence community has determined North Korea has successfully produced a miniaturized nuclear warhead that can fit inside its missiles.
North Korea seemed unfazed by the president's bluster, however, as state media carried a statement indicating the communist nation is "carefully examining" a plan to strike the U.S. Pacific territory of Guam.
Politics also lifted US defense stocks.
Stocks jumped early in the session after data showed USA job openings surged to a record high in June. Lockheed Martin, Raytheon, General Dynamics and Northrop Grumman were all up, with the Dow Jones U.S. defense index up 1.48 percent at 409.58. The 30-stock index snapped a 10-day winning streak and a streak of nine straight record closes. Economists had expected productivity to increase by 0.7 percent. Energy stocks fell along with crude prices as investors kept an eye on the latest company earnings and geopolitical news.
Mr. Trump's threatening rhetoric on North Korea "is nearly entirely responsible for the pullback", said Randy Frederick, vice president of trading and derivatives for Charles Schwab. The Dow slid 0.2 percent to 22,085.34.
In the latest USA economic data, the Labour Department's Job Openings and Labor Turnover Survey, or JOLTS, showed job openings rose by 461,000 to a seasonally adjusted 6.2 million, a record high.
German and USA government bonds, alongside gold and the Japanese and Swiss currencies, were the main beneficiaries. The euro fell to $1.1760 from $1.1793. The S&P experienced a sharp decline that began Tuesday as soon as Mr. Trump issued an ultimatum to North Korea. Brent crude, the worldwide standard, lost 28 cents to $52.09 a barrel in London. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.5 basis points at 2.228%.
Hong Kong's Hang Seng Index was off 0.09%.
MARKETS ABROAD: In Europe, Germany's DAX rose 0.3 percent, while France's CAC 40 added 0.2 percent.