By Anna Hirtenstein

U.S. stocks fell Thursday on one of the busiest days of the corporate earnings season, while new data laid bare the extent of the economic damage wrought by the coronavirus pandemic.

The Dow Jones Industrial Average fell 434 points, or 1.7%, to 26105 in early-morning trading. The S&P 500 declined 1.2%, and the Nasdaq Composite slipped 0.8%.

Most of the stocks in the blue-chip index and all 11 sectors of the S&P 500 were trading lower shortly after the opening bell. The retreat followed data showing the U.S. economy saw its biggest-ever quarterly plunge in activity and an uptick in weekly unemployment claims suggesting the recovery in the labor market may be faltering.

Investors largely expected poor economic figures, and the extent of the second quarter's decline in gross domestic product -- nearly 33% on an annualized basis -- came in ahead of economists' expectations. Still, the Commerce Department data confirmed the extent of the pandemic's damage, showing few corners of the U.S. economy were spared.

"The speed at which the economy shut down in March and the magnitude of the drop was breathtaking in real time," said Jim Baird, chief investment officer at Plante Moran Financial Advisors. "The record-shattering decline of 33% is no less shocking on the surface, its impact mitigated only because it was expected."

Some stocks bucked the broader market's decline after reporting upbeat earnings, highlighting the handful of "winners" during the crisis.

Shares of United Parcel Service, for example, surged 13% after it reported a record jump in daily shipping volumes. PayPal shares advanced 4.6% after it reported that its revenue and profit beat expectations due to a boom in online shopping and digital payments.

Technology giants will take center stage after markets close, with Apple, Facebook, Amazon.com and Google's parent company Alphabet set to release their latest financial results. Those reports will show how tech companies are weathering the economic downturn and may even be benefiting from the lockdown measures. Most of those stocks were trading lower.

"We would say that the results will look more positive than the rest of the market, but a caveat is that expectations are higher as a result," said Raj Shant, a portfolio specialist at an affiliate of PGIM Group. "One overriding factor benefiting tech names is that the digitization of society has been pulled forward by at least a couple of years due to the lockdowns."

Meanwhile, Treasury prices rose, with the yield on the benchmark 10-year bond slipping to 0.549%, from 0.578% Wednesday.

Stocks didn't fare much better overseas, with most indexes falling. The pan-continental Stoxx Europe 600 slipped 2.3%, and most indexes in Asia closed lower.

Germany reported that its economy contracted the most on record, shrinking 10.1% in the second quarter. The country's benchmark stock index, the DAX, retreated 2.6% and was the worst performer among European equity markets.

Among European stocks, Volkswagen declined 6.3% in German trading after the automotive company posted a net loss for the second quarter and cut its dividend. Lloyds Banking Group dropped more than 7.4% in London after the lender unexpectedly posted a loss for the first half and increased the amount of money set aside to cover losses stemming from the pandemic's impact on the economy.

Brewing giant Anheuser-Busch InBev rose 3.3% after it said that its beer sales are picking up as lockdown measures are easing, with volumes rising in June. Airbus advanced nearly 3% after it posted a loss but said it is focused on preserving cash in the second half of the year. It also said it still has too little visibility to give guidance for the year.

-- Michael Wursthorn contributed to this article.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com