U.S. stocks took a hit Wednesday after data showed a sharp slowdown in the pace of U.S. economic growth in the first quarter, suggesting a deeper early-year slowdown than previously anticipated.

The Dow Jones Industrial Average fell 74.61 points, or 0.4%, to 18035.53. TheS&P 500 declined 7.91 points, or 0.4%, to 2106.85. The Nasdaq Composite Indexshed 31.78 points, or 0.6%, to 5023.64.

Stocks kicked off the session lower and held on to losses through the afternoon following a report from the Commerce Department that showed the U.S. economy grew a paltry 0.2% in the first quarter, well below expectations.

The economy grew at a much faster 2.2% pace during the last three months of 2014. Wednesday’s reading is the latest indicator suggesting a marked slowdown in the U.S. economy early in the year, taking place against the backdrop of a tepid first-quarter earnings season.

U.S. stocks, hit Wednesday by signs of slowing growth, held onto their losses after the Fed signaled that interest-rate increases are still possible in the coming months. Photo: Getty

The report sent the dollar sliding against other major currencies and knocked European markets sharply lower. Germany’s DAX lost 3.2%, while France’s CAC 40 lost 2.6% and the Stoxx Europe 600 index shed 2.2%. The euro gained 1.3% to $1.1118.

“The economic data needs to improve,” said David Seaburg, head of sales trading at Cowen and Co. in New York. “It’s just not where it needs to be … it’s scary.”

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Though major U.S. stock benchmarks have advanced in recent weeks, they have done so at an uneven pace. A weak first-quarter earnings season, coupled with slowing economic growth and uncertainty over the Federal Reserve’s timeline for interest-rate increases, have made for a rockier few months for stocks. The S&P 500 is up 1.9% so far in April.

The Fed’s latest policy statement, released Wednesday, offered investors little additional clarity on its course of rate increases. The Fed attributed the recent economic slowdown to “transitory factors,” but offered little in the way of additional guidance. ChairwomanJanet Yellen did not give her usual news conference, and stocks held losses following the afternoon statement.

“It’s a nonevent,” said Tom Carter, managing director at brokerage firm Jones Trading, who added that the sharp selloff in European markets attracted more attention from investors. “Europe’s the bigger story.”

Investors eye Twitter, Mastercard and GoPro stock on Wednesday morning. WJS’s Kristen Scholer tells why on the News Hub. Photo: Getty

Treasury bonds lost ground. U.S. bond prices had sunk before the Fed’s statement and the yield on the 10-year note hit a six-week high of 2.08%, along with a broad selloff in government debt markets in Europe.

Higher-yielding stocks declined alongside the selloff in bonds Utilities stocks in the S&P 500 fell 0.3%. The $27-billion Vanguard Real Estate Investment Trust Index Fund lost 2%.

U.S. economic data has been weak of late, contributing to weaker quarterly results and a rockier stock market this year, said Kevin Kelly, chief investment officer at Recon Capital Partners, which manages about $200 million.

“The economic numbers certainly have been damaged, and that story that we’re doing so well is not as intact,” Mr. Kelly said. “You can see that in the market action this year, and you can see that in the earnings.”

Mr. Kelly said he remained invested in shares of large, dominant technology companies. He said he boosted his stake in Google Inc. earlier this year.

The latest round of earnings reports, meanwhile, were a mixed bag Wednesday. Analysts now expect first-quarter earnings among S&P 500 companies to decline 1.7%, including the 277 companies that have so far reported results, according to FactSet. If confirmed, that would mark the biggest decline in earnings since the third quarter of 2009, though it’s an improvement from the expected earnings drop of 4.7% forecast in late March.

Humana Inc. shares dropped 7.2% after the company reported earnings that fell below analysts’ expectations on an operating basis. Anthem Inc. posted first-quarter revenue that was lower than analyst forecasts, pushing shares down 2%.

Shares of Wynn Resorts Ltd. fell 17% after the casino operator said late Tuesday that it swung to a quarterly loss.

Shares of Akamai Technologies Inc. fell 1.2% after the cloud-computing service firm reported first-quarter results that fell short of its own forecast.

Starwood Hotels & Resorts Worldwide shares gained 8.3% after the company said it hired investment bank Lazard to explore strategic alternatives, a move that could put the company up for sale. The hotel operator also reported lower first-quarter earnings.

Shares of Twitter fell 8.9%, extending Tuesday’s decline following the early release of the company’s disappointing first-quarter results.

Oil prices jumped 2.7% to $58.58 a barrel.

Write to Dan Strumpf at daniel.strumpf@wsj.com

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