In short:

• Wallace's main motivation is very importantly twofold: 1. he wants mankind, in the trillions, to conquer the stars in flocks (the end goal being more philosophical, he wants to literally have man break out of the universe and into "heaven") and, importantly, 2. he wants to be the "God", or creator, who ushers in this ascension to heaven. This primary goal is more important to him than any one replicant, which, while he professes to cherish and love like a parent, it's more that he loves himself for having the power to create life.
• Wallace, as Tyrell's successor, and suffering from God complex, is furiously jealous of Tyrell's achievement of creating replicants that can reproduce (which would be the ultimate method for spreading this species at an exponential rate, population-wise, the surefire way to achieve his main motivation), and so this fury and frustration expresses itself in this scene. The newborn replicant is infertile (he makes a comment with the word "barren", though the exact quote is lost on me), and so he discards her. This reinforces the theme of ethics involving treating non-humans (especially those designed to be slaves) inhumanely, as well as it reinforces his own god-dellusions of creating and taking life, as well as it is an expression of his frustration.
• The final point is a bit of a bonus – he is watching Luv's reaction as this happens, so he presumably knows it has an effect on her. The desired effect is that Luv fears and respects him more, and that it is now been shown to her how important and urgent the search for the child is (in order to attain the power of reproduction), so it's a motivation boost for Luv for many reasons, too.

Wallace kills her because she cannot breed.

Wallace is trying to create replicants that can have children. Wallace's words reveal his intent to create a civilization that spans the stars - but he needs replicants that can breed to do that:

"...Now let's have a look at you...we make angels in the service of civilization...yes there were bad angels once...now I make good angels. That is how I took us to nine new worlds. Nine. A child can count to nine on fingers. We should own the stars. Every leap of civilization was built off the back of a disposable workforce. We lost our stomach for slaves unless engineered. But I can only make so many. "

Wallace refers to the woman's inability to have children - she is "barren"...

"That barren pasture, empty and salted...right here. The dead space between the stars."

This reveals that Wallace has been trying to create new models of replicants that can breed - but this woman replicant is another failed experiment. A tear falls from Luv's eyes suggesting that she knows or been witness multiple times before to the horror about to unfold.

Wallace quotes Satan in a line from Milton's Paradise Lost

Wallace reveals that as the creator of this new civilization he is metaphorically like Satan who felt compelled to replace God in his seat in heaven.

"And this the seat we must change for heaven "

Wallace's quote above is from when Lucifer was cast from heaven and into hell as a Fallen Arch-Angel.

Wallace then implies he is in his own living hell in that he cannot replicate Tyrell's accomplishment of creating breeding replicants.

"I cannot breed them. So help me. I have tried. We need more Replicants than can ever be assembled. Millions so we can be Trillions more. We could storm Eden and retake her. Tyrell's final trick: Procreation. Perfected then lost."

Wallace then tells Luv the work she has to do.

"But there is a child. Bring it to me."

As he leaves, he asserts the importance of of her replicant role as an "angel built to serve civilization." He implies she is like the angels serving God - but in this case God is him.

"The best of angel of all. Aren't you, Luv?"

The first thing to note is that Wallace has a significant god complex. This is evidenced by much of his dialog, especially during that scene. I cannot recall his exact words, but he seemed to indicate a desire to create replicants capable of reproduction, as if he were a god bringing a new species of sentient being into the world.

This explains two things. Firstly, it explains his obsession with Deckard's child, as she holds the key to replicant reproduction, and her mother is already dead so she cannot be tested. Secondly, this also explains why Wallace slashes the newborn replicant's womb because he perhaps does not think that this new series of replicant is capable of reproduction.

It's hard to be certain given that the the movie was not very forthcoming about Wallace's character and that we do not yet have access to the script. Thus this is merely my interpretation based on the knowledge I do have.

I believe this scene was a projection of power from master, Wallace to Luv. The scene would seem chaotic, if not put in this context. Wallace is understanding that he cannot yet replicate, but is showing his favoured henchman that he is willing to destroy newer, more refined models if he does not get what he wants. At the beginning of the conversation Wallace mentions that angels should not enter heaven without a gift, suggesting that Luv has not brought him what he desires. His slaughter of a newer, grander model, suggests that even Luv, 'the best angel of all' is not excused from bringing what their master desires. Wallace's suggestion that he cannot make enough replicants and his symbolic killing of one of the newest, suggests he is willing to go to any lengths to get what he wants.