Stocks tumbled Thursday after the latest U.S. economic data showed a sharp slowdown in growth and pointed to persistent inflation.

The Dow Jones Industrial Average slid 375.12 points, or 0.98%, to close at 38,085.80, weighed down by steep declines in Caterpillar and IBM. The S&P 500 dropped 0.46% to finish the session at 5,048.42, and the Nasdaq Composite lost 0.64% to 15,611.76.

U.S. gross domestic product expanded 1.6% in the first quarter, the Bureau of Economic Analysis said. Economists polled by Dow Jones forecast GDP growth would come in at 2.4%.

Along with the downbeat growth rate for the quarter, the report showed the personal consumption expenditures price index increased at a 3.4% pace, well above the previous quarter's 1.8% advance. This raised concern over persistent inflation and put into question whether the Federal Reserve will be able to cut rates anytime soon. Taken together, both findings suggest a stagflationary environment — that is, a combination of slowing economic growth and rising inflation — and could add another headwind for policymakers moving forward.

"In the short term, the numbers don't appear to be a green light for either bulls or bears...the uncertainty is unlikely to ease pressures in a market experiencing its deepest pullback since last year," said Chris Larkin, managing director of trading and investing at E*Trade from Morgan Stanley.

Following the GDP print, traders moved down expectations for an easing of Federal Reserve monetary policy. Fed funds futures trading data suggests there will be just one interest rate cut this year, according to the CME FedWatch Tool.