NEW YORK (TheStreet) -- It's been two full weeks of big swings and the volatility showed no signs of coming to an end on Friday. 

Stocks plumbed new lows by mid-afternoon as the debate over when the Federal Reserve might hike interest rates intensified following a mixed jobs report. 

The S&P 500 was down 1.8%, the Dow Jones Industrial Average fell 1.9%, and the Nasdaq slid 1.4%. The Volatility Index, otherwise known as the "fear index," spiked 14.3% to 29.28. 

The jobs report for August did little to point the Fed in any one direction. On the one hand, data showed the U.S. added far fewer jobs than expected in August. On the other, hourly wages rose and the unemployment rate dropped.

The U.S. added 173,000 jobs in August, according to the Labor Department, far below economists' estimates of an increase of 223,000. U.S. hourly wages rose 0.3% month on month, above expectations of 0.2% growth. The unemployment rate fell to 5.1%, its lowest level since 2008 and a faster drop than the forecast of 5.2% unemployment predicted.

Markets were jittery as investors tried to glean what the labor market situation might mean for the Fed's rate hike timeline.

"If one was inclined to believe the Fed would not hike in September, the headline miss works in your favor," Dan Greenhaus, chief strategist at BTIG Research, wrote in a note. "If one felt the opposite, the drop in the unemployment rate along with a rebound in earnings works in your favor," he added.

Brad McMillan, chief investment officer at Commonwealth Financial Network, noted that the ambiguity leaves markets in store for more uncertainty over Fed thinking. "This very much leaves the question open," he said in comments to TheStreet. "What I think everyone, maybe even the Fed, was hoping for was a number that would make it a no-brainer decision and this is not that number."

August is a historically hard-to-read month, which could also explain the missed forecast. Over the past decade, August was the month with the lowest first estimate which was then revised in the following two months, according to Reuters analysis. Since 2005, the government has added an average 58,000 more jobs to payrolls in August than initially reported.

Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, made the case for higher interest rates on Friday. Lacker noted that higher interest rates are needed as business investment and housing rebounds and the labor market tightens.

"It's time to align our monetary policy with economic progress," he said. Lacker is a voting member of the Federal Open Market Committee.

The perceived likelihood of a September rate hike has decreased as markets deal with extreme volatility in global trading in chaos. The market-implied probability of a rate hike has fallen below 50% even as economic data continues to support a U.S. recovery.

China's markets were closed for their second day to commemorate World War II. That left global markets to turn to the U.S. for direction and most tumbled on fears the Fed would raise rates even as the world economy falters.

In Europe, Germany's DAX tumbled 2.7%, France's CAC 40 slid 2.8%, and the FTSE 100 in London fell 2.4%. Japan's Nikkei closed 2.2% lower.

Gap (GPS - Get Report) shares were on watch after the retailer reported a 2% decline in same-store sales in August. However, its major chain Old Navy reported a 6% increase in sales.

Infoblox (BLOX) fell 9.1% despite a better-than-expected fourth quarter. The IT company earned 12 cents a share, 2 cents above estimates, while revenue surged 34% to $87 million.

BlackBerry  (BBRY) shares were up 1.5% after the company agreed to buy Good Technology for $425 million in cash. BlackBerry expects the deal to close in the third quarter of fiscal 2016.