"Obviously we are looking at the increased tensions between the USA and North Korea", said Brad Bechtel, managing director FX at Jefferies in NY.
In 3.28pm trading in NY, the Dow Jones Industrial Average fell 0.15 percent, while the Nasdaq Composite Index declined 0.18 percent.
The benchmark Korea Composite Stock Price Index lost 12.44 points, or 0.52 percent, to 2,382.29 in the first 15 minutes of trading. -North Korea tension also weighed on the Canadian dollar, which weakened against its US counterpart, despite higher oil prices and stronger-than-expected domestic housing data.
Stocks had pushed into positive territory, but dropped in the last hour of trading after President Donald Trump warned Pyongyang it will face "fire and fury" if it continues to threaten the United States.
Office Depot tumbled 22.4 percent after the office supplies retailer's quarterly results came in below estimates.
Dean Foods Co.'s stock plunged 21 percent after reporting earnings in the second-quarter that were way below investors' expectations. The yield on the 10-year Treasury note held steady at 2.26 percent.
Banks and technology stocks were among the big gainers Tuesday, offsetting losses among health care and consumer-focused companies.More news: Gujarat RS Election: Defeat a lesson for the BJP
Oil prices settled lower after a volatile session on increasing exports from key OPEC producers and news of lower crude shipments from Saudi Arabia.
Second-quarter earnings have been stronger than expected with analysts now expecting S&P 500 earnings to have expanded 11.8 percent, up from 8 percent at the start of July, according to Thomson Reuters I/B/E/S. On the Nasdaq, 1,846 issues fell and 953 advanced favoring decliners.
European shares were also lower following reports that a auto had rammed a group of soldiers in Paris, injuring six before speeding off in what officials identified as a suspected terrorist attack. Copper rose 4 cents to $2.94 a pound.
USA 2-year yields touched a low of 1.323 percent, matching a low hit four weeks ago. The euro strengthened to $1.1756 from $1.1752.
In Europe, Germany's DAX rose 0.3 percent, while France's CAC 40 added 0.2 percent. 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 Nasdaq composite fell 45 points, or 0.7 percent, to 6,324.
Asia: Nikkei -1.3%; Shanghai -0.2%; Hang Seng -0.4%; Sensex -0.5%.