Earlier, the average had been down more than 88 points. The Nasdaq composite lost 99 points, or 1.6 percent, to 6,252. Germany's DAX fell 1.1 percent, while the CAC 40 in France lost 0.6 percent.
"We are at the end of an intense first-quarter earnings season, and that changes the dynamics or focus for brokers and the buyside going into next week, from one which is more reactionary to the constant flow of results, to one which is more about the bigger picture", said Stefan Worrall, director of Japan equity sales at Credit Suisse in Tokyo.
Although South Korean and Indian stocks have climbed to new record highs this year as global capital moved into Asian emerging markets, the research team at Capital Economics cited three reasons why they don't expect the recent growth to last. The Russell 2000 index of smaller-company stocks gave up 6 points, or 0.5 percent, to 1,390.
"Right now the market is viewing it as a lot of saber-rattling and a lot of smoke, but not much fire", said Darrell Cronk, president of Wells Fargo Investment Institute.
U.S. President Donald Trump ratcheted up his rhetoric toward North Korea on Thursday, saying the reclusive communist country should be "very, very nervous" if it even thinks about attacking the United States or its allies.
The Vix, a measure of how much volatility investors expect in stocks, jumped to its highest level since May after North Korea revealed a plan to launch ballistic missiles toward a major US military hub in the Pacific. The comments follow reports that the North has mastered a technology needed to strike the United States with a nuclear missile. Prices for bonds and gold headed higher.
The New Zealand dollar was 0.79 lower against the greenback after New Zealand's central bank said it was slightly more uncomfortable with the high level of the local dollar than it had been in May.
Investors opted for the perceived safety of US Treasuries, which pushed the yield on the 10-year note three basis points lower to 2.21%.
While the tough talk about the potential for war is scary, investors have heard it many times before.
"That reset is being triggered by North Korea geopolitical concern and stretched valuations", said Peter Kenny, senior market strategist at Global Markets Advisory Group in NY.
It follows a sell-off in overnight markets, as global stocks got the jitters from rising levels of animosity between the USA and North Korea.
Outside of geopolitical concerns, disappointing company earnings and outlooks put traders in a selling mood. The stock fell $1.01 to $22.02.
MOUSE HOUSE: Disney dropped 4.9 percent a day after the media giant reported a weak quarter and said it would pull its movies from Netflix and start two of its own video streaming services. Broadcom gave up $5.72, or 2.3 percent, to $243.45.
Dudley also cautioned that "it's going to take some time" for inflation to rise to the central bank's 2 percent target even as he offered a generally positive outlook for the USA economy, job market and price pressures.
The dollar weakened after news that USA producer prices unexpectedly fell in July, recording their biggest drop in almost a year and pointing to a further moderation in inflation that could delay a Federal Reserve interest rate increase.