The Nasdaq is on track for a weekly loss of 1.5%, its worst since June. Financial companies and department store operators were among the big decliners.
Stocks plunged, while US Treasuries and gold climbed, as US President Donald Trump's latest comments further inflamed tension with North Korea. Oil prices veered lower as early gains faded.
The Nasdaq Composite was down 37.30 points, or 0.59 percent, at 6,315.03. Lockheed Martin, Raytheon, General Dynamics and Northrop Grumman all rose and the Dow Jones US defense index was up 1.6% after hitting a record high.
North Korea on Thursday outlined details for a missile strike near the USA territory of Guam, adding fuel to rising tensions with the United States.
Trump continued to ramp up the rhetoric with a post on Twitter this morning indicating that the U.S.is prepared to take military action against North Korea.
US government bonds strengthened Friday as soft inflation data led investors to further scale back expectations for interest-rate increases from the Federal Reserve.
The Vix, a measure of how much volatility investors expect in stocks, jumped 34.8 per cent, the biggest increase since May.
"Although we certainly can get a 5 to 7 percent correction, we don't think it's the start of a significant bear market", Peterson noted.More news: Buffalo Bills invest in future by trading Ronald Darby, Sammy Watkins
An Associated Press report that the US and North Korea have been engaged in back channel talks (https://apnews.com/686ac7c761694b28b67793a1d8297145?link=mktw) for several months even as they exchange incendiary threats may also help to soothe jitters.
2 biotech stocks that rallied after earnings. Dillard's slumped 15.5 percent after the chain booked a loss for the second quarter as increased inventory led to big discounts. Its shares tumbled $13.09 to $60.25. Kohl's also declined, sliding $3.62, or 8.6 percent, to $38.31. The trend appeared to overshadow strong quarterly revenue growth in the quarter. Small-company stocks fell more than the rest of the market. Economists had expected prices to rise by 0.2 percent. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2 basis points at 2.192 percent.
Separately, U.S. producer prices unexpectedly fell in July, recording their biggest drop in almost a year, weighed down by declining costs for services and energy products. It added 39 cents to $49.56 a barrel overnight. Brent crude, used to price global oils, slid 52 cents, or 1 percent, to $52.18. Silver gained 20 cents, or 1.2 percent, to $17.07 an ounce.
CURRENCIES: The dollar slipped to 109.98 yen from 110.06 late Wednesday in Asia. The euro rose to $1.1753 from $1.1752.
MARKETS OVERSEAS: Major indexes in Europe were headed lower.
Japan's benchmark Nikkei 225 inched down less than 0.1 per cent to finish at 19,729.74. Germany's DAX fell 0.9 percent, while the CAC 40 in France lost 0.5 percent.