Investors instead turned to safe-haven assets such as gold, pushing it to a two-month high, and the Japanese yen rose. It is trading at its best level in two months, and is threatening to crack the $US1,300 level for the first time since the day following the USA presidential election.
Gold has rallied 2.3% this week on the heels of renewed tension with North Korea. The Dow slumped by 1.1 percent, while the Nasdaq and the S&P 500 tumbled by 1.5 percent and 1.4 percent, respectively.
Korea said it is examining an operational plan for firing a ballistic missile towards Guam.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.6 percent in its third session of declines, heading for a 1.5 percent drop for the week.
US stock futures ESc1 were marginally softer on Friday.
"It's awesome when you consider the headlines just how calm the equity markets are, how they've taken things in their stride", said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.
The Dow Jones industrial average lost 123 points, or 0.6 percent, to 21,923.
Global markets have been on edge since Tuesday, when President Donald Trump warned North Korea of severe retribution should the authoritarian state proceed with any more missile tests or threats.
Juve, Laxalt avvicina Spinazzola
Il Milan ha preso molti buoni elementi, ma non vedo fenomeni: tra i nostri ex, Conti è uno dei giovani più interessanti. Braccio di ferro che continua, con protagoniste Juventus e Atalanta: in ballo il futuro di Leonardo Spinazzola .
However, analysts at UBS Evidence Lab said Domino's market position is challenged with growing competition and United Kingdom consumer weakness, and that investment was needed to simply maintain its market position.
Gold prices continued to climb on Friday, as geopolitical tensions between the US and North Korea kept safe-haven demand elevated while data showing July inflation undershot expectations, lessened the prospect of a rate hike this year.
Despite the risk-off attitude in the market, stocks in NY were taking back some losses at the London equities close, as bargain hunters entered the market following steep falls in United States stock indices earlier this week.
Declining issues outnumbered advancing ones on the NYSE by a 2.29-to-1 ratio; on Nasdaq, a 2.47-to-1 ratio favoured decliners.
South Korea's KOSPI fell 1.7 per cent on Friday to its lowest since May 24, but its losses for the week were a relatively modest 3.2 per cent.
ENERGY: Benchmark U.S. crude added 1 cent to $49.18 per barrel in electronic trading on the New York Mercantile Exchange.
Ongoing global glut concerns lingered in oil markets despite a bigger-than-expected draw in U.S. crude inventories, leaving prices volatile.
The dollar pulled back against the euro and other currencies after the Consumer Price Index rose a tame 0.1 percent in July.