The Dow Jones industrial average lost 204 points, or 0.9 percent, to 21,844.
The Nasdaq lost 2.1% to 6,216.87.
Officials from the South Korean presidential office earlier insisted the North Korean threat may have been aimed at multiple objectives, including causing the kind of confusion and chaos now seen in both South Korea and the United States, which in turn may weaken the alliance between the two, rather than signaling its actual or imminent armed provocation.
Sterling GBP= was last trading at $1.3006, up 0.02 percent on the day.
Canadian Tire Corp Ltd rose 3.4 percent to C$146.65.
Meanwhile, gold stocks bucked the downtrend, driving the NYSE Arca Gold Bugs Index up by 1.3%.
Earlier on Wednesday, US stocks were trading lower after President Trump's warning to North Korea to "not make any more threats" is met by just that as North Korea ratcheted up tensions threatening missile strike action against US military installations near Guam.
A separate report showed United States factory gate prices dipped by 0.1% month-on-month in July, in line with the consensus and alongside a flat reading at the "core" level, which was forecast to rise 0.2%. Netflix fell 2.4 percent.
Palladium fell 0.2 per cent to $895.30 per ounce.
Investors piled into safe-haven assets such as USA government bonds, gold and the Japanese yen and sold off shares.
The financial sector (-1.8%) also underperformed the broader market, as did the consumer discretionary group (-1.5%), which was hurt by retailers as shown by the 3.1% plunge in the SPDR Retail ETF. The Dow shed 0.2 percent.
The dollar index .DXY fell 0.14 percent, with the euro EUR= unchanged at $1.1757.
US crude CLcv1 rose 1.08 percent to $49.70 per barrel and Brent LCOcv1 was last at $52.78, up 1.23 percent on the day.
ENERGY: Benchmark U.S. crude lost 23 cents to $48.94 per barrel in electronic trading on the New York Mercantile Exchange.
In other precious metals, silver rose 0.4 per cent to $16.48 per ounce.
The dollar was steady at 110.030 yen after going as low as 109.560 overnight, its weakest in eight weeks.
Markets overseas were mixed Tuesday.
The stock market jitters came as North Korea outlined plans to launch missiles aimed at the waters off the coast of the US Pacific territory of Guam. US gold futures GCcv1 gained 1.63 percent to $1,283.20 an ounce. Japan's Nikkei 225 Index edged down by 0.1%, while Hong Kong's Hang Seng Index tumbled by 1.1%.
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