On Thursday, the 10-year Treasury yield posted its biggest one-day drop since September of last year as investors bid up bond prices, while gold futures gained 0.5 percent. Treasurys and gold are seen as safer assets to hold than stocks.
Bank stocks, meanwhile, fell along with Treasury yields. The SPDR S&P Bank ETF (KBE) fell 3.7 percent, while Citigroup, J.P. Morgan Chase and Bank of America all closed lower.
The Cboe Volatility index (VIX), widely considered the best gauge of fear in the market, rose above 22.
"You could see more pressure [on stocks] if the trade issue" grows, said Bruce McCain, chief investment strategist at Key Private Bank. "The question is: What is the reality of that happening? Most agree this could hurt the economy."
Losses in tech also helped stocks fall. Tech shares have been under pressure lately amid a sharp decline in Facebook shares. News broke recently that data research firm Cambridge Analytica gathered data from 50 million Facebook profiles without the permission of its users. Shares of Facebook have been under pressure all week, sliding 8.5 percent through Wednesday's close. On Thursday, they fell 2.7 percent.
Facebook CEO Mark Zuckerberg broke his silence over the news, telling CNN it had been "a major breach of trust, and I'm really sorry that this happened."
The news raised concern that U.S. lawmakers could draw up regulation on data usage for Facebook and other major tech companies.
"They're not going to write the regulation just for Facebook, said Shawn Cruz, manager of trader strategy at TD Ameritrade, noting regulators are going to target the entire sector. "That could turn into a headwind for these stocks."
The PowerShares QQQ Trust (QQQ), which tracks the tech-heavy Nasdaq 100 index, dropped 2.5 percent, breaking below its 50-day moving average, a key technical level. Google-parent Alphabet fell 3.6 percent and dipped into correction territory. Tech companies are also among the companies that could be in the cross-hairs of a U.S.-China trade war.