With more than 50 companies in the Standard & Poor's 500 reporting results, it was one of the busiest days of the earnings season. But investors were distracted from mostly positive corporate news by the disappointing GDP report, which aggravated inflation worries and renewed concerns that Federal Reserve policy makers would take a more aggressive posture on rates when they meet next week.

"I think the GDP numbers have kept inflation on the front burner and that's obviously weighing on the day's action," said Bryan Piskorowski, market analyst at Wachovia Securities. "But bonds are not reacting super badly to these numbers. We're at a pivotal point right now. What the bond market is trying to do is determine at what point do we see light at end of the tunnel with regard to the Fed? So we're taking some solace in that."

The Dow fell 128.43, or 1.26 percent, to 10,070.37.

The broader gauges also fell. The S&P 500 index was down 13.16, or 1.14 percent, at 1,143.22. The Nasdaq composite index declined 26.25, or 1.36 percent, to 1,904.18, its lowest close since Oct. 14.

Treasury prices rallied, with the yield on the 10-year note slipping to 4.15 percent, from 4.23 percent late yesterday. The U.S. dollar was mixed against other major currencies; gold prices fell. Crude futures, down for most of the day, rebounded to settle 16 cents higher at $51.77 on the New York Mercantile Exchange.

Higher energy prices and weaker consumer and business spending was a drag on the economy during the first quarter; the Commerce Department said GDP grew at an annual rate of just 3.1 percent in the first three months of the 2005, the slowest pace of expansion in two years. The broadest barometer of the economy's health, GDP measures the value of all goods and services produced within the United States. Economists had forecast growth of 3.5 percent.

An inflation gauge tied to the GDP report and closely monitored by the Fed showed a 2.2 percent rise in prices, excluding food and energy. That was up considerably from the 1.7 percent rate recorded in the fourth quarter, and marked the highest reading since the final quarter of 2001.

In addition to the day's economic data, investors had a lot of corporate news to sift through, as well, with 52 companies in the S&P 500 reporting earnings before, during and after the session. Of the 308 S&P companies that had released results by yesterday evening, 66 percent beat the consensus estimate of analysts surveyed by Thomson Financial, 16 percent matched expectations and 19 percent missed.

"Earnings for the most part have been OK, not blowout, but OK," said Neil Massa, equity trader at John Hancock Funds in Boston. "But I think the economic picture is still worrisome. The question you have to ask is how much more upside is there to equity stock prices when we're in a rising interest rate environment?"

Microsoft Corp., down 54 cents at $24.45 in the regular session, gained back 26 cents in after-market trading following the release of its earnings report. The software giant's earnings nearly doubled over last year, but its revenue failed to meet Wall Street expectations.

Exxon Mobil Corp. skidded 4.1 percent, or $2.38, to $56, after the world's largest publicly traded oil company reported a 44 percent surge in earnings over the same period last year, due to strong crude and natural gas prices. Excluding items, the company earned $1.15 per share in the latest quarter, which missed the consensus estimate of analysts surveyed by Thomson Financial by 5 cents.

Procter & Gamble gained 46 cents to $53.99 after the nation's largest household products maker reported strong earnings driven by volume increases across all business units, and raised its forecast for the rest of 2005.

Northrop Grumman Corp., the world's largest shipbuilder, also topped expectations with robust first quarter earnings thanks to solid sales growth, higher operating profit across all segments and lower corporate and interest expenses. Northrop Grumman, which also raised its forecast for the year, rose 73 cents to $54.23.

On the American Stock Exchange, Intermix Media Inc. plunged 17 percent, or 83 cents, to $3.97, after New York Attorney General Eliot Spitzer filed suit against the Internet marketer, blaming it for secretly installing software that delivers nuisance pop-ups that can slow down or crash personal computers.

The Russell 2000 index, which tracks smaller company stocks, was down 12.12, or 2.06 percent, at 575.02.

Decliners outnumbered advancers by about 3 to 1 on the New York Stock Exchange.