The Dow and S&P 500 closed higher after a late rally Wednesday, erasing declines from most of the session after data showed the economy contracted in the first quarter for the first time in three years.

In a session filled with economic data, the Commerce Department said its advance gross domestic product report showed a 0.3% contraction for the first quarter, falling short of expectations for 0.3% growth, according to economists polled by Reuters.

A separate report on monthly consumer spending, which accounts for more than two-thirds of economic activity, showed a jump of 0.7% in March, topping expectations for a 0.5% rise. Both the GDP and consumer spending data appeared to be affected by the trade war, as businesses and consumers pulled forward spending to avoid tariffs.

Wednesday's reports join a series of data releases this month that have pointed to an increasingly uncertain outlook for the U.S. economy, as the fallout from the Trump administration's steep tariffs and unpredictable trade policy takes effect.

A gauge of the labor market indicated U.S. private payrolls growth slowed more than expected in April, as the ADP National Employment Report revealed an increase of only 62,000 jobs, well short of the 115,000 estimate, after a downwardly revised 147,000 gain in March.

On the plus side, a gauge of inflation showed price pressures cooled in March, stemming some fears for a possible stagflation environment, when growth slows and prices rise.

"I'm not surprised the headline GDP print wasn't worse, given the surge in imports," said Jamie Cox, managing partner at Harris Financial Group in Richmond Virginia.

"Underneath, however, real final demand remains super strong. Those who underestimate the U.S. consumer, do so at their own peril,"

According to preliminary data, the S&P 500 gained 8.06 points, or 0.14%, to end at 5,568.89 points, while the Nasdaq Composite lost 14.98 points, or 0.09%, to 17,446.34. The Dow Jones Industrial Average rose 114.68 points, or 0.28%, to 40,642.30.

Traders are now pricing in a full percentage point interest rate cut from the Federal Reserve by the end of the year, although recent comments from Fed Chair Jerome Powell and other officials have indicated the central bank is likely to be cautious before adjusting policy.

Consumer staples was among the best performing sectors, buoyed in part by a jump in chocolate and snack company Mondelez after its quarterly results topped expectations.

After the closing bell, "Magnificent Seven" members Meta Platforms and Microsoft were due to post their results that investors will eye for clarity on the outlook for AI-focused investments, which have helped fuel the stocks rally in recent years.

Both Meta and Microsoft shares were weaker. Adding to concerns about a deceleration in AI investment, Super Micro Computer cut its third-quarter forecasts due to delays in customer spending, while Snapchat parent Snap said it would not provide a second-quarter financial forecast, the latest in a string of companies in various sectors that have withdrawn their outlooks. Super Micro and Snap shares both fell.

Dow component Caterpillar shares were choppy after its disappointing quarterly results before ending with slight gains. After a sharp slump following the April 2 tariff announcements by U.S. President Donald Trump, stocks have rebounded, but the Dow and S&P 500 still registered monthly declines.

Wednesday marks 100 days since Trump took office. Changes in trade policies and tariffs have heightened uncertainty and fueled volatility, negating initial enthusiasm after his November election over the possibility of business-friendly policies such as deregulation and tax cuts.