I'm only looking to format a specific string within a cell. I change that cell's format to "Markdown" but I'm not sure how to change text color of a single word.
I don't want to change the look of the whole notebook (via a CSS file).
You can simply use raw html tags like
foo <font color='red'>bar</font> foo
Be aware that this will not survive a conversion of the notebook to latex.
As there are some complaints about the deprecation of the proposed solution. They are totally valid and Scott has already answered the question with a more recent, i.e. CSS based approach. Nevertheless, this answer shows some general approach to use html tags within IPython to style markdown cell content beyond the available pure markdown capabilities.