This is a cosmetic issue that can be caused by a recent Windows update, specifically Windows Cumulative Update Preview (KB5022478 and KB5022405) and Security update for Windows (KB5022282), removing and reinstalling these updates may correct the issue.
As a workaround, you can select the item with the mouse by clicking the drop-down and scrolling with the mouse cursor. Or disregard the highlight as it will only select the last one you stop on when scrolling with the keyboard. Also, the issue will be less prevalent if the option "Drop-down list displays automatically" is disabled in the company global options settings.
To disable this setting: