The Dow Jones Industrial Average closed down 204.69 points, or 0.93 percent, at 21,844.01, the S&P 500 lost 35.81 points, or 1.45 percent, to end the session at 2,438.21 and the Nasdaq Composite fell 135.46 points, or 2.13 percent, to 6,216.87.
Cracks are showing in what has been a virtually non-stop US equity rally after a rapid escalation of tension between North Korea and the United States this week. In three days. the Nasdaq has lost 2.6% - the most since last September.
At the close trading in NY, the Dow Jones Industrial Average was down 204.69 points, or 0.9%, to 21,844.01, its biggest one-day fall since May 17. "But we're in a low inflationary environment, which can help valuations remain elevated for longer than they would otherwise". "I think a few investors are capitulating to it".
Until this week, the equity market had managed to shake off negative news, including previous saber-rattling over North Korea and failures in Washington to pass high-profile bills, such as repealing and replacing Obamacare.
More than 430 stocks from all USA exchanges hit their lowest levels in 52 weeks or more on Thursday, the most for any session since mid-November right after Trump was elected.
On average, the S&P 500 falls 5% or more every 10 weeks and the index falls 10% every 33 weeks, according to data analyzed by AllianceBernstein going back to 1928. The consumer discretionary index was one of its biggest losers with a 0.47 per cent drop.
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.
Economists had expected prices to rise by 0.2 percent.
On Thursday, the CBOE Volatility Index, a barometer of expected near-term stock market volatility, closed at its highest since the United States presidential election. Consumer-focused companies and technology stocks slumped. Blue Apron fell -17.63% after a greater-than-expected loss of $31.6m or 47 cents per share.
Macy's posted revenue of $5.55bn which beat consensus estimates of $5.5bn. The Stoxx Europe 600 benchmark was down 1% (http://www.marketwatch.com/story/european-stocks-face-worst-week-in-9-months-on-us-north-korea-tensions-2017-08-11), while Hong Kong's Hang Seng led the Asian losses with a drop of 2%. Titled "Reckless game over the Korean Peninsula runs risk of real war", the editorial suggested China will stay neutral if North Korea strikes first, but will intervene if the U.S.is the first mover.
Buying interest may be somewhat subdued, however, as the ever-escalating war of words between President Donald Trump and North Korea continues to raise geopolitical concerns.
Gold, another classic safe haven asset, was trading at around $1,292 per ounce, up more than two percent this week and near a nine-week high.