North Korea has since threatened to launch missiles at the USA territory of Guam, and the country previously threatened "all-out war, wiping out all the strongholds of enemies, including the US mainland".
The Standard & Poor's 500 index fell 7 points, or 0.3 percent, to 2,467.
The Nasdaq Composite .IXIC was down 68.30 points, or 1.08 percent, at 6,284.03. US President Donald Trump said that North Korea would face "fire and fury" if it continued to threaten the States, however North Korea has dismissed these warnings by the USA incumbent as a "load of nonsense".
Wall Street's fear gauge - the CBOE Volatility Index or the VIX - surged 44%, its second-biggest one-day jump of the year.
Six out of the S&P 500's 11 major sectors closed positive on August 9.
Mounting tensions lifted USA defense stocks.More news: Markets slide, dollar slumps as North Korea fears spike
"The geopolitical tensions could be the catalyst for the market's direction in the next coming weeks depending on how it all shakes out", said Robert Pavlik, chief investment strategist at Boston Private, as quoted by CNBC. In a tense situation like this, equity markets can move lower exceptionally fast, and investors don't want to be caught on the wrong side of the markets, so they are getting out now'.
He doubled down on those remarks on Thursday, suggesting that perhaps his rhetoric wasn't harsh enough.
On Thursday, the CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the USA presidential election.
"We have not had a 5 percent correction since June 2016". On Thursday, fellow newly public company Blue Apron Holdings lost 18% after the meal-kit maker reported rising costs amid increased competition.
Macy's dropped 4.2 percent as it reported second-quarter revenues fell 5.4 percent to $5.6 billion, another sign of the travails facing department stores.
Nasdaq 100 e-minis were down 1 points, or 0.02 percent, on volume of 49,062 contracts.
The rhetoric between the US and North Korea has continued to heat up, leading traders to look to safe havens such as gold and treasuries.
Analysts surveyed by Bloomberg say core inflation probably rose 0.2 percent in July. Yields fall when bond prices rise.