On Wall Street overnight, the Nasdaq retreated 2.1 percent, while the S&P 500 was down 1.4 percent, and the Dow Jones Industrial Average pulled back 0.9 percent. Natural gas was also flat at $2.98 per 1,000 cubic feet.
The Nasdaq Composite Index, the hardest hit equity gauge on Thursday, climbed 36 points, or 0.6%, to 6,252.
US stock futures were marginally softer on Friday. Is that a reason to be?
"What has changed this time is that the scary threats and war of words between the US and North Korea have intensified to the point that markets can't ignore it", said Shane Oliver, head of investment strategy at AMP Capital in Sydney.
Cracks are showing in what has been a virtually non-stop USA equity rally after a rapid escalation of tension between North Korea and the United States this week.
North Korea responded with threats to launch missiles into the Pacific Ocean near Guam, a US territory.
For the week, the Dow is on track to fall 0.9%, its biggest one-week drop since April.More news: Zlatan Ibrahimovic set to make a Premier League return
"Given the speculative flows positioning for possible yen repatriation, we could see the psychologically significant 109.00 level give way", Stephen Innes, head of Asia Pacific trading at OANDA, wrote in a note. The Fed, which raised its key interest rate in March and June, has signaled it plans a third rate hike before the end of this year.
While stocks have declined this week, the sell-off has not been dramatic.
The headlines about North Korea served as a spark to jolt investors out of complacency on the heels of an extended period of calm in the market, said McClellan who shared the following chart in a report. It was on course for a weekly rise of about 5%, the biggest such gain since July 2016.
The dollar was steady against a basket of six major currencies at 93.412 after falling 0.2 percent on Thursday, with disappointing US inflation and jobs data adding to the greenback's woes.
Outside the political arena, declines in a pair of technology stocks added to the cautious tone on the day.
In other corporate news, shares of Snapchat parent Snap fell 13% after it reported earnings late Thursday that missed analyst forecasts. Over the next three months, the average gain has been good but not great - +1.15%.
Markets remained concerned over the risk of a USA first-strike against North Korean nuclear facilities.More news: Virginia governor orders National Guard on standby ahead of 'alt-right' rally
"There is a low probability that we will have a war with North Korea", he said, and a larger pullback in stocks is "a buyable drop".
An editorial in China's state-run Global Times (http://www.globaltimes.cn/content/1060791.shtml), published late Thursday local time, added to the pressure on Asian markets.
"The war of words between the leaders of the US and North Korea continues to dominate investor sentiment", said Forex.com technical analyst Fawad Razaqzada.
"Today's inflation data put the Fed on pause and really diminishes the fact that there's still some noise going around with the North Korea-U.S. situation", said Phil Blancato, CEO of Ladenburg Thalmann Asset Management.
Stock movers:Nordstrom Inc.(JWN) shares earlier rose after the retailer posted earnings that beat expectations (http://www.marketwatch.com/story/nordstrom-shares-rise-after-retailer-tops-views-sales-rise-2017-08-10) but the stock is trading mostly flat. WTI was last trading at $49.74 a barrel while Brent was at $52.95.
The yen tends to benefit during times of geopolitical or financial stress as Japan is the world's biggest creditor nation and there is an assumption that Japanese investors will repatriate funds should a crisis take place.More news: Keith Ellison: I Regret Saying NKorea's Kim 'More Responsible' Than Trump
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