The Dow is down 123.95 points or 0.6% at 21,924.75, the Nasdaq is down 95.89 points or 1.5% at 6,256.44 and the S&P 500 is down 23.40 points or 1% at 2,450.62. Secretary of State Rex Tillerson later insisted the USA isn't signalling it's about to mete out a military response despite threats from North Korea suggesting it could attack Guam, a US island territory in the Pacific.
Pyongyang said on Wednesday it was considering plans for a missile strike on the US Pacific territory of Guam, just hours after Trump said North Korea would face "fire and fury" if it threatens the United States, his strongest warning yet for North.
ANALYST TAKE: "We're seeing significant risk aversion in the markets on Wednesday, with the escalation in tensions between the USA and North Korea triggering moves into safe haven assets", said Craig Erlam, senior market analyst at OANDA.
The North Korea situation isn't the only thing weighing on stocks.
Overall, the healthcare sector slumped 3.4 percent.
Shares of Dow component Walt Disney were down 4.44 percent as investors doubted whether it can succeed with its plan to launch its own streaming services rather than rely on Netflix Inc to reach online viewers.
The report said labor productivity climbed by 0.9% in the second quarter after inching up by a revised 0.1% in the first quarter. Economists had expected another 0.1% uptick.
On the United States economic front, the Labor Department released a report showing labor productivity increased by slightly more than expected in the second quarter.
Cempra (CEMP) is leading the biotech sector lower, extending the pullback seen over the course of the previous session. Brent crude, used to price global oils, added 4 cents to $52.74. With the drop, the index has slid to a one-month intraday low.
Meanwhile, gold stocks are bucking the downtrend, driving the NYSE Arca Gold Bugs Index up by 1.2%.
Steel, networking, and financial stocks are also seeing notable weakness in mid-day trading, although selling pressure is somewhat subdued.
Investors are losing enthusiasm for Canada's banking stocks as a slowdown in the country's housing market dents banks' growth prospects, with insurance companies seen as a better bet to benefit from higher interest rates. Japan's Nikkei 225 Index tumbled by 1.3%, while Hong Kong's Hang Seng Index fell by 0.4%. "We believe continued saber-rattling ... could take gold prices higher still", Nitesh Shah, director at ETF Securities, told Reuters.
The major European markets also showed notable moves to the downside on the day. While the French CAC 40 Index fell by 0.6%, the German DAX Index slumped by 1.1% and the UK's FTSE 100 Index plunged by 1.4%. "Tensions over North Korea lend support to safe-haven assets, particularly gold". Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 5.5 basis points at 2.228%.