Stocks were slammed Thursday by a weaker-than-expected gross domestic product report, disappointing earnings from major companies and a turnaround in oil prices.

The blue-chip Dow Jones industrial average (search) tumbled 128.43 points, or 1.26 percent, to end at 10,070.37 while the technology-packed Nasdaq Composite Index (search) fell 26.25 points, or 1.36 percent, to close at 1,904.18. It was the lowest close for the Nasdaq since October. The broader Standard & Poor's 500 Index (search) ended lower 13.16 points, or 1.14 percent, at 1,143.22.

Stocks had slumped all day but lost more ground late in the session as oil began to recoup earlier losses. U.S. light crude settled at $51.77 a barrel, up 16 cents on the day after earlier sinking as low as $49.80.

"In many ways, the oil markets have taken on as much of a role in determining where economic growth is going to be as much as the Fed does," said Gordon Fowler Jr., chief investment officer at The Glenmede Trust Co. "For the interim, there's going to be a very strong relationship between the oil price and where the markets go."

In the face of rising energy prices and weaker consumer and business spending, the Commerce Department (search) reported that GDP grew at an annual rate of just 3.1 percent in the first quarter, the slowest pace of expansion in two years.

GDP, the broadest barometer of the economy's health, measures the value of all goods and services produced within the United States. Economists, who had forecast growth of 3.5 percent, saw the latest snapshot as fresh evidence that the economy has hit another "soft patch."

An inflation gauge tied to the GDP report and closely monitored by the Federal Reserve (search) 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.

"The market digested the economic data and wasn't at all pleased that the GDP numbers came in at a lower-than-expected rate," Fowler said. "There's growing concern that this slow patch is going to be longer and deeper than people originally thought, and that's going to have a negative impact on earnings and economic growth over the next few quarters."

Meanwhile the ranks of Americans lining up to claim unemployment benefits for the first time grew by 21,000 last week, as expected, government data showed on Thursday. But continued jobless claims declined to the lowest level in four years.

Also driving the market were earnings reports from several key corporations.

Exxon Mobil Corp. (XOM) 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 Co. (PG) nudged up 46 cents to $53.99 and was the Dow's second-biggest percentage gainer. P&G, the maker of Crest toothpaste and Pampers diapers, said earlier in the day that quarterly profit jumped 13 percent, beating estimates, and raised its fiscal year forecast.

JDS Uniphase (JDSU), a maker of equipment to build fiber optic networks, fell 9.7 percent, or 16 cents to $1.49 after its quarterly loss widened as the company consolidates manufacturing and trims jobs.

Nextel Communications Inc. (NXTL), the fifth-biggest U.S. mobile phone provider, fell 1.6 percent, or 46 cents to $28.53, weighing on the Nasdaq, after it said first-quarter profit was nearly flat.

Contract electronics manufacturer Sanmina-SCI Corp. (SANM) tumbled 16 percent, or 71 cents to $3.79 a day after it posted a large quarterly loss as it wrote off goodwill.

Among gainers, Starbucks Corp. (SBUX) rose 4.6 percent, or $2.15 to $48.56 a day after it reported a 27 percent increase in quarterly earnings and raised its profit forecast. Goldman Sachs Thursday raised its investment rating on Starbucks to "outperform" from "in-line."

Northrop Grumman (NOC), 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. (MIX) 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.

Trading was active, with 1.75 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.92 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.

Decliners outnumbered advancers on the New York Stock Exchange by about 11 to 5 and by about 11 to 4 on Nasdaq.

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

Overseas, Japan's Nikkei stock average rose 0.03 percent. In Europe, France's CAC-40 slid 0.41 percent, Britain's FTSE 100 added 0.02 percent and Germany's DAX index was down 0.26 percent.

Reuters and The Associated Press contributed to this report.