Dallas Fed President Rob Kaplan, a nonvoting member of the Fed's committee, said in another speech the case for a rate hike has strengthened in the past few months. Also, Fed Governor Lael Brainard unexpectedly announced she'd deliver a speech Monday.
Investors have been closely listening to Fed officials and looking at economic data, trying to gauge when the Fed might raise rates. Market expectations for a rate hike this month were 24 percent on Friday, up from 18 percent Thursday, according to the CME Group's FedWatch tool.
That said, U.S. stocks have continued to hold in their recently tight range. The S&P 500 had gone 43 straight sessions without closing 1 percent higher or lower as of Thursday's close.
JJ Kinahan, chief strategist at TD Ameritrade, said "I think people might overreact to this move on the S&P because they haven't seen a 1 percent move in so long."
Sean Lynch, co-head of global equity strategy at the Wells Fargo Investment Institute, said earlier this week market volatility could pick up this month. "We believe that this volatility is likely to be focused on the riskier areas of the market, but that it may cross all equity classes," Lynch said in a Wednesday note to clients.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded more than 30 percent higher, near 16.4. "We wished for volatility and the VIX rose 30 percent," TD Ameritrade's Kinahan said.
Fort Pitt Capital's Forrest also said the nuclear bomb test in North Korea held overnight may be weighing on market sentiment, since "North Korea has been a wildcard and continues to be a wildcard."
Investors also kept an eye on oil prices Friday. U.S. crude settled 3.65 percent lower at $45.88 a barrel, a day after surging more than 4.5 percent following a 14.5 million barrel drawdown reported by the Energy Information Administration.
Still, WTI posted a weekly gain of more than 3 percent, according to FactSet. Baker Hughes said U.S. oil rigs rose by 7.
Wholesale trade data for July showed inventories remained unchanged, while sales fell 0.4 percent.
U.S. Treasurys fell broadly on Friday, with the two-year note yield near 0.79 percent and the benchmark 10-year note yield around 1.67 percent. The U.S. dollar rose against a basket of currencies, with the euro near $1.1218 and the yen around 102.7.
Overseas, European equities slid, with the Stoxx 600 falling 1.09 percent. In Asia, stocks closed mostly lower after North Korea held a nuclear test.
The Dow Jones industrial average dropped 394.46 points, or 2.13 percent, to close at 18,085.45, with Verizon leading all components lower.
The S&P 500 fell 53.49 points, or 2.45 percent, to end at 2,127.81, with utilities leading all sectors lower.
The Nasdaq closed 133.57 points lower, or 2.54 percent, at 5,125.91.
About 19 stocks declined for every advancer at the New York Stock Exchange, with an exchange volume of 1.068 billion and a composite volume of 4.112 billion at the close.
High-frequency trading accounted for 49 percent of August's daily trading volume of about 6.12 billion shares, according to TABB Group. During the peak levels of high-frequency trading in 2009, about 61 percent of 9.8 billion of average daily shares traded were executed by high-frequency traders.
CORRECTION: The Dow sunk as much as 215 points before afternoon, ET. The depth of that drop was misstated in a previous headline.