Wall Street drops as hawkish Fed official comments weigh

Wall Street's main indexes ended modestly lower on Thursday in a choppy session as hawkish comments from a U.S. Federal Reserve official and data showing the labor market remained tight led some investors to worry about more aggressive interest rate hikes.

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."

Stocks have retreated in recent days after a strong month-long rally spurred by softer-than-expected inflation reports that raised hopes the Fed would temper its rate hikes.

"The Fed is still talking up, generally, interest rates," said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago. "There might be some disagreement about the pace. But interest rates are not coming down anytime soon.”

Stocks reduced losses late in the session but the major indexes still ended in negative territory.

The Dow Jones Industrial Average (.DJI) fell 7.51 points, or 0.02 per cent, to 33,546.32, the S&P 500 (.SPX) lost 12.23 points, or 0.31 per cent, to 3,946.56 and the Nasdaq Composite (.IXIC) dropped 38.70 points, or 0.35 per cent, to 11,144.96.

Data showed the number of Americans filing new claims for unemployment benefits fell last week, suggesting the labor market remained tight. A report on Wednesday detailed strong retail sales growth last month, indicating the economy has weathered rate hikes.