Stock prices were mixed in New York yesterday as investors digested the dual effects of modest inflation brought about by a cooling economy.

The Dow Jones closed down 58.61 at 11,008.39, while broader stock indicators were mixed. The Standard and Poor's 500 was down 7.33 at 1,477.10, the Nasdaq Composite finished up 1.13 at 3,852.79 and the Russell 2000 was up 0.68 at 510.61.

Investors sold retail stocks in the fear that second-half profits could fall short of expectations if consumer spending eases in response to the Federal Reserve's policy of cooling the economy to fight inflation.

Economic data released today provided further evidence that the Fed's strategy to slow the economy may be working.

The Labour Department's Consumer Price Index, a widely watched barometer for inflation, showed that US consumer prices rose a mild 0.2 per cent last month, as the cost of petrol eased after soaring in June.