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By Lisa Pauline Mattackal and Purvi Agarwal
(Reuters) -Wall Street's main indexes dropped on Wednesday after data showed the economy contracted for the first time in three years in the first quarter, deepening concerns around the impact of U.S. tariffs and the global trade war.
The Commerce Department's advance gross domestic product report took center stage on a data-packed day, showing a 0.3% contraction for the first quarter, compared with expectations for 0.3% growth according to economists polled by Reuters.
Private payrolls growth also slowed more than expected in April, while the personal consumption expenditure index - the Federal Reserve's preferred inflation gauge - was broadly in line with expectations.
U.S. consumer spending grew 1.8% after a robust 4% jump in the fourth quarter.
Wednesday's reports join a series of data releases over the month that have pointed to an increasingly uncertain outlook for the U.S. economy, as the fallout from the Trump administration's steep tariffs and erratic trade policy take effect.
Traders are now pricing in a full percentage point interest rate cut from the Fed by the end of the year.
"The Fed has been very data dependent and they're going to want to see some of this hard data like GDP and some of the labor market data really show signs of weakness," said Charlie Ripley, senior investment strategist at Allianz Investment Management.
"We are starting to see a little bit of that, which is really why you're seeing the market reacting the way it is today."
At 11:46 a.m. ET, the Dow Jones Industrial Average fell 219.69 points, or 0.54%, to 40,307.93, the S&P 500 lost 47.41 points, or 0.85%, to 5,513.42 and the Nasdaq Composite lost 212.90 points, or 1.23%, to 17,248.42.
Declines were broad-based, with most S&P 500 sectors in the red and the energy index leading losses with a 3% drop. The economically sensitive small-cap Russell 2000 fell 1.3%.
Meanwhile, "Magnificent Seven" members Meta Platforms and Microsoft fell 2.6% and 0.9% ahead of their results, due after markets close, that investors are watching closely for clarity on the outlook for the tech sector and AI-focused investments.
Fanning concerns about a pullback in investments into AI, Super Micro Computer cut its third-quarter forecasts due to delays in customer spending, while Snapchat parent Snap said it would not provide a second-quarter financial forecast.
Their shares fell nearly 15% each.
Caterpillar slipped 0.7%, reversing premarket gains booked after its quarterly results.