Trading started on the wrong side for Wall Street bulls on Thursday morning.

All major asset categories headed south on worries that the U.S economy is heading into stagflation. That's a situation of slowing economic growth and rising inflation.

Stagflation worries followed the release of a government report showing that the world's largest economy switched into a lower gear. The Gross Domestic Product (GDP) -- a measure of the nation's output during a calendar year -- expanded by an annualized 1.6% in the first quarter of 2024.

That's down from 3.4% in the previous quarter, and well below forecasts of 2.5%. It's the second consecutive marked-down since the contractions in the first half of 2022.

Thanks to a slowdown in consumer spending (2.5% vs. 3.3%) due to a decline in goods consumption (-0.4% vs. 3%), while spending on services rose faster (4% vs. 3.4%).

A slowdown in GDP growth is usually associated with a slowdown in inflation. But not this time around, when inflation moved in the opposite direction.

The price index for personal consumption expenditures (PCE) climbed at an annual rate of 3.4% in the first quarter of 2024, up from a 1.8% increase in the previous three-month period, according to the U.S. Bureau of Economic Analysis.

The acceleration of PCE is consistent with other inflation metrics, like the Consumer Price Index (CPI) and the Producer Price Index (PPI). They all confirm that inflation is moving in the wrong direction, dashing any hopes of interest rate cuts this year and prompting a sale of every risky asset.

At 11 a.m. ET, Bitcoin was trading at $63,402, down 2.76% for the day; the S&P 500 was trading at 4,997.23, down 1.46% for the day; the Dow Jones was at 37,774.52, down 1.78%; the tech-heavy Nasdaq was at 15,420.16, down 1.87%; and the small caps Russell 2000 was at 1964.66, down 1.57%.

The sell-off was extended to Treasury bonds, sending bond yields 1.33% higher for the day.

"Stagflation is a growing risk after GDP missed, and the price index surprised on the upside," said David Russell, Global Head of Market Strategist at TradeStation, told International Business Times. "If inflation isn't getting better with such a weak growth, you must wonder if the trend toward lower prices will continue." "The yield bump after the report suggests rate cuts are increasingly in doubt."

Scott Helfstein, SVP, Head of Investment Strategy at Global X, is less pessimistic, seeing one interest rate cut in July or at the end of the year. "The Fed is not apt to make any major moves ahead of the election in September or November. So, it comes down to the July 31 and December 18 meetings," he told IBT. Many data will come out before December, but one cut in 2024 looks reasonable."

Meanwhile, Wall Street must deal with another problem: the reporting of lackluster guidance by tech leaders. Last week, Netflix disappointed Wall Street with its decision to stop providing subscriber data—something equity traders perceived as a sign the streaming giant's growth is ebbing. This week, Wall Street, Meta, the parent company of Facebook, issued its disappointing guidance, prompting a sell-off in the shares of magnificent seven companies.

These tech giants are part of every major equity index, adding to the selling pressure from stagflation worries.