Friday caps a week dogged by escalating tension between the US and North Korea which culminated with President Donald Trump stating that his earlier threat to unleash "fire and fury" on North Korea "maybe wasn't tough enough".
The Nasdaq Composite was down 37.30 points, or 0.59 percent, at 6,315.03.
In the latest economic data, the consumer-price index (http://www.marketwatch.com/story/us-consumer-inflation-remains-soft-in-july-cpi-shows-2017-08-11) rose a seasonally adjusted 0.1% in July, its fifth straight month of softness, raising more questions about whether inflation will eventually rise to hit the Federal Reserve's 2% annual rate target. Nasdaq fell -135 points or -2.13% and the S&P 500 slid -35 points or -1.45%. May 17 was the last time the three indexes had a bigger single-day decline.
Most large-cap stocks fell across the board. All the indexes are down for the week. The yield on the 10-year Treasury note slipped to 2.21 percent from 2.25 percent late Wednesday. It has been the leading S&P gainer so far this year, making it particularly vulnerable to a decline. Utilities eked out a small gain. "If the market really believed that the reaction of north korea was imminent, I think it would drop much more" nuanced Alan Skrainka. "As long as it doesn't go beyond just a war of words, this is going to be short-lived".
Earlier on Thursday, North Korea revealed a plan to launch ballistic missiles toward a major USA military hub in the Pacific.
A man watches a television screen showing U.S. President Donald Trump, left, and North Korean leader Kim Jong Un during a news program at the Seoul Train Station on Thursday.
The market jitters gave investors an opportunity to pocket some of their recent gains after a string of record highs fueled by strong corporate earnings.
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US stocks closed higher on Friday as Wall Street clawed back from a sharp decline in the previous session but the market still posted a weekly loss on lingering geopolitical uncertainties.
Following the sell-off seen in the previous session, stocks are regaining some ground during trading on Friday.
TECH SLIDE: Losses among technology stocks led the market slide.
"We have not had a 5 percent correction since June 2016".
Several financial sector companies also helped pull down the market. Oil prices were headed higher.
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. Brent crude, used to price worldwide oils, slid 80 cents, or 1.5 percent, to $51.90.