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.
The Dow and S&P 500 inched higher on the day but they both posted their largest weekly percentage drops since late March.
"In all likelihood the North Korea problem will persist for years to come, with the U.S, and increasingly China, attempting to contain and restrain Kim Jong-un", said Tom Elliott, worldwide investment strategist at deVere Group.
THE QUOTE: "Inflation - or lack of -- has been an ongoing problem for the central bank and some policy makers have voiced concerns about this in recent months as they consider whether to raise interest rates again this year", said Craig Erlam, senior market analyst at OANDA.
North Korea said it was completing plans to fire four intermediate-range missiles over Japan to land near the U.S. Pacific island territory of Guam in an unusually detailed threat. Hong Kong's Hang Seng dipped 1.1 percent to 27,444.00. The Russell 2000 index of smaller-company stocks picked up 1.69 points, or 0.1 percent, to 1,374.23.
London stocks stumbled lower as Thursday's session was dogged by continued geopolitical tensions over the US-North Korea situation, uninspiring United Kingdom economic data and a heavyweight bunch of stocks going ex-dividend.
"Pretty remarkable, perhaps even extraordinary, considering", said Tim Ash, strategist at fund manager BlueBay.
In European markets, the French CAC 40 was down 0.7% and Frankfurt's DAX 30 shed 1.2%.
The bigger surprise is that the cost to protect against declines in the kiwi against the US dollar for one month shot up to the most expensive levels since April.
Below that level lies another key technical chart support level for the dollar at 108.13 yen, a trough the USA currency k plumbed in mid-April.
The Japanese currency is often a safe have asset too.
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 US economy, job market and price pressures.
The S&P is trading near its most expensive valuation level since 2004, as measured by the price-to-12-month forward earnings ratio.
The pound was down 0.09% against the euro at 1.1049 and down nearly 0.2% on the dollar at 1.2978.
Gold was up for the third day, hitting an intra-day high of $1,280.38 an ounce that was last recorded mid-June. It was on course for a weekly rise of about 5%, the biggest such gain since July 2016.
The Canadian dollar was trading at an average price of 78.67 cents United States, down 0.04 of a USA cent. Brent crude, used to price global oils, gained 40 cents to $52.54 in London.