Stocks fell on Friday as market participants cautiously await the Federal Reserve's upcoming policy decision due out next Wednesday. The Dow Jones Industrial Average dropped nearly 290 points, while the S&P 500 Index and Nasdaq Composite lost roughly 1.2% and 1.6%, respectively.

Here's how the market settled to close out the week:

S&P 500 Index (SPY  ): -1.22% or -54.78 points to 4,450.32

Dow Jones Industrial Average (DIA  ): -0.83% or -288.87 points to 34,618.24

Nasdaq Composite Index (QQQ  ): -1.56% or -217.72 points to 13,708.33

Despite Friday's negativity, the Dow managed to post a positive week, rising by 0.12%. However, both the S&P 500 and Nasdaq ended their second straight week of losses, falling about 0.2% and 0.4%, respectively.

Auto stocks were in focus on Friday after the United Auto Workers went on strike after failing to reach a deal with General Motors (GM  ), Ford (F  ) and Stellantis (STLA  ) Thursday night. The union said about 12,700 workers will be on strike, impacting GM's midsize truck and full-size van plant in Wentzville, Missouri, Ford's Ranger midsize pickup and Bronco SUV plant in Wayne, Michigan, and Stellantis' Jeep Wrangler and Gladiator plant in Toledo, Ohio.

On the economic front, consumer sentiment declined to 67.7 for the University of Michigan's survey preliminary reading for September, down from 69.2 in August. Meanwhile, inflation outlook for one year from now fell to its lowest level in more than 2 years to 3.1%. The five-year inflation outlook also fell to 2.7%.

Market participants are looking ahead towards the Federal Reserve's policy decision next week, as a mixed bag of recent economic reports signal that the central bank may raise interest rates again before the year is over. Still, most analysts expect the Fed to hold rates at their current level on Wednesday, but will look for clues on the central bank's forward moves on inflation following the decision.

For earnings, Adobe (ADBE  ) shares fell after the software firm posted better-than-expected third-quarter results. For the fourth quarter, Adobe expects earnings in the range of $4.10 and $4.15 per share, coming in above Wall Street estimates. Lennar (LEN  ) shares also fell after the home construction company reported better-than-expected third quarter earnings and revenue on Thursday.

Elsewhere, Needham initiated coverage of Arm Holdings (ARM  ) with a Hold rating, citing that the stock may be fully valued a day after listing on the Nasdaq.

"In new growth areas, however, not only do viable alternatives to Arm exist, but ecosystem control often resides in the hands of others," analyst Charles Shi wrote in a note. "We think Arm can grow by capturing greater value from smartphones, but not enough to support upside from the stock's IPO valuation."