The Dow Jones Industrial Average fell 63.37 points, or 0.29 per cent, to 22,021.97.
The utilities index.SPLRCU, often seen as a bond proxy because of its companies' slow reliable growth and high dividends, was the only S&P sector that ended the day up, showing a 0.25 percent gain.
After seeming to shrug off the heated rhetoric between U.S. President Donald Trump and North Korea over the last couple of days, investors are becoming more wary as the standoff between the two countries continues ratcheting up, said Michael Currie, vice-president of TD Wealth Private Investment Advice.
Germany's DAX Index fell 0.6 percent, while the UK's FTSE 100 Index retreated 1.2 percent, and France's CAC 40 Index slid 1.4 percent.
North Korea responded to the threat with a warning of their own saying it was "carefully examining" the idea of a missile strike in Guam, a U.S. Pacific territory.
Oanda analyst Craig Erlam said: "Risk aversion is once again the name of the game.as geopolitical tensions mount and investors head for cover in the traditional safe havens".
The recovery fit a recent pattern of investors using dips to put more money in stocks.
The Federal Reserve's hint about unwinding balance sheets, the possibility of the European Central Bank tapering stimulus and the looming debate about the USA debt ceiling in the fall challenge the market's recent performance, Mr. Baele said.
US equities steepened their losses late in the session after President Donald Trump said his earlier warnings to North Korea may not have been tough enough.
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Charles Howell III (OSU): Howell improved by nine strokes, shooting a 2-under 69, putting him in position to make the cut. He finished his second round with just one birdie to three bogeys. "I'm just excited about the opportunity", Kisner said.
Excluding food and energy prices, core consumer prices still crept up by 0.1% in July, matching the increases seen in the three previous months.
"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.
Shares rose more than 1.3% or 4.9p to 388.5p. Regions Financial shed 23 cents, or 1.6 percent, to $14.07. The company posted better-than-expected quarterly earnings but its sales missed expectations.
On the economic front, data is expected to show that USA consumer prices likely rose in July after being unchanged the prior month.
The biggest fallers were G4S down 24.7p to 305.9p, Standard Chartered down 20.9p to 783.1p, Prudential down 44p to 1,841.5p, Shire down 92p to 3,945p. Copper rose 1 cent to $2.91 a pound.
USA stocks closed lower on Tuesday after Trump's comments sparked a late afternoon selling.
Tokyo's Nikkei 225 share index closed down 1.3 per cent at its lowest since June 1 as the strong yen hit exporters, while South Korea's KOSPI index fell 1.1 per cent to seven-week lows.
There were falls of almost 2% on South Korea's Kospi and Hong Kong's Hang Seng, with markets in mainland China and Australia also down - taking their cues from sharp losses on Wall Street earlier.