Stocks drop as hawkish Fed official's comments weigh

STORY: After a choppy day for stocks, Wall Street's main indexes ended modestly lower on Thursday as hawkish comments from a Federal Reserve official - and data showing a still-tight labor market - led to worries about more aggressive rate hikes.

The Dow closed just below flat, while the S&P 500 and Nasdaq each lost about a third of a percentage point.

St. Louis Fed President James Bullard said the central bank needs to keep raising rates given that its tightening so far had “only limited effects on observed inflation."

And data out Thursday showed the number of Americans filing new claims for unemployment benefits fell last week, suggesting the labor market remained tight – another sign the Fed will continue on its aggressive rate path.

But some company earnings reflected both consumer resiliency and fewer supply chain issues, providing optimism for Stephen Lee, founding principal of Logan Capital Management.

"You know, I think big picture, there's a little worry about the Fed raising rates too much and triggering a recession and a slowdown. That being said, when you peel, we'll look under the covers a little, investors are also rewarding those companies that are showing the ability to work in an environment of higher inflation and a changing consumer. So, we think it's actually a healthy day because you're seeing those companies that are doing well that can execute well being rewarded.”

Specifically, shares of Macy's surged 15% after the department store chain raised its annual profit forecast on solid demand for high-end clothes and beauty products.

And Cisco Systems shares rose 5% after the company raised its full-year revenue and profit forecast with supply chain hurdles easing. The stock helped the S&P 500 information technology sector log a gain for the session.