Simmering tensions between the USA and North Korea were also weighing on the market.
The rhetoric, which began late Tuesday and continued into Friday, interrupted stocks' march higher and cracked the calm that has enveloped the market for months.
Stocks are ending broadly lower on Wall Street, led by declines in technology companies and banks, two of the highest-performing sectors over the a year ago.
Mr Trump, whose threat this week to bring "fire and fury" was dismissed by North Korea, said Thursday that statement might not have been "tough enough". "If the answer is 'yes, ' then you better get defensive". "As long as it doesn't go beyond just a war of words, this is going to be short-lived".
Railroad stocks have shown a strong move to the upside on the day, driving the Dow Jones Railroads Index up by 1.3 percent.
The technology sector was the S&P's biggest drag with a 2.2 per cent drop.
He said the crisis provided a "perfect trigger" for a correction at a time when many markets - including the FTSE 100 - were at or around record highs, leaving them vulnerable to a sell-off if investors think it is time to take profits. Ten-year US yields dropped 4.3 basis points to 2.24 per cent and German equivalents fell 3 bps to 0.43 per cent, a six-week low.
However these stocks - along with tech giants Microsoft and Alphabet, Google's parent - have been among the top performers all year.
"Given the great run we've had, seems like some sort of pullback wouldn't be surprising", said Michael Baele, managing director of investments at U.S. Bank Private Wealth Management.
"The escalation of the geopolitical situation between the US and North Korea is beginning to rattle investors' nerves as was witnessed in the VIX index yesterday", said Peter Cardillo, chief market economist at First Standard Financial.
"There's a lot of unknowns out there; we're past the good news of earnings", he said. Shares of Macy's lost 10% and Kohl's fell 5.8%.
Heading into Thursday, some 89 percent of the companies in the S&P 500 had reported quarterly results.
Dow e-minis were up 6 points, or 0.03 percent, with 29,187 contracts changing hands at 8:34 a.m. ET (1234 GMT).
Of those, 52 percent delivered earnings and revenue that beat financial analysts' forecasts, according to S&P Global Market Intelligence.
In other news, United States wholesale inflation dropped in July, the first contraction in almost a year and another data point that could weaken the case for the Federal Reserve to raise the benchmark interest rate again later this year. The yield on the 10-year Treasury note slipped to 2.22 per cent from 2.25 per cent late Wednesday.
The dollar pulled back against the euro and other currencies after the Consumer Price Index rose a tame 0.1 percent in July.