The Smurfs rang the opening bell at the New York Stock Exchange on Friday, but there was little humor to be found after the government reported that the economy was in worse shape than many had expected.
U.S. stocks slumped: the Dow Jones index, the Nasdaq and the S&P 500 all shed about 1 percent as soon as trading started.
Investors already had been jittery after lawmakers in Washington delayed a vote on a Republican proposal to raise the U.S. government's debt limit. Time was running out to get a deal before the U.S. begins to run short on cash and cannot pay some of its bills.
The U.S. economy came perilously close to flat-lining in the first quarter and grew at a meager 1.3 percent annual rate in the April-June period as consumer spending barely rose.
The Commerce Department data on Friday also showed the current lull in the economy began earlier than had been thought, with the growth losing steam late last year.
S&P 500 futures fell 14.8 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futureswere down 127 points, and Nasdaq 100 futures lost 18 points.
House Speaker John Boehner's failure to round up enough votes for his plan late Thursday exposed a rift in the Republican Party that is hampering efforts to reach a compromise to raise the U.S. debt ceiling before a Tuesday deadline.
House Republicans are due to meet at 10 a.m. EDT to discuss a way forward.
The euro zone debt crisis is also a concern to markets. Rating agency Moody's put Spain on review for a possible downgrade on Friday, adding to worries that a Greek rescue package has done little to halt the spread of Europe's debt crisis.
Amgen Inc, the world's largest biotechnology company, is expected to post lower profit and revenue as sales of its once top-selling anemia drug Aranesp continues to erode.
On Thursday, the S&P 500 fell for a fourth straight day as buyers kept to the sidelines while lawmakers struggled to hash out an agreement on the deficit and debt ceiling.