* Investors cautious after big rally; overshadows data * Durable goods post largest 2-year gain * New home sales rise at fastest pace since Sept 2008 * Stocks mixed: Dow up 0.1 pct, S&P flat, Nasdaq off 0.1 pct (Updates to late afternoon, changes byline)
By Angela Moon
NEW YORK, Aug 26 (Reuters) - U.S. stocks were mixed on Wednesday as investors were cautious about making big bets after a rally this week, overshadowing solid data on durable goods and home sales.
For the third consecutive day, equities bounced after favorable news, but the gains fizzled.
"It's a sleepy day on Wall Street," said Fred Dickson, market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
"It seems like traders have lost the momentum after a huge upward move and they are finally taking a breather."
After a five-month run-up that has sent the broader S&P 500 up 52 percent from its 12-year closing low on March 9, analysts have been questioning the rally's strength.
"We're at a crossroads," said Rob Stein, managing partner at the Chicago-based Astor Asset Management.
"Economic data has improved slightly while the market has improved more than slightly. This means the data will need to catch up to the market, or the market may be ahead of itself and needs to correct. I think it'll be the latter."
The Dow Jones industrial average was up 11.48 points, or 0.12 percent, at 9,550.77. The Standard & Poor's 500 Index was up just 0.08 of a point, or 0.01 percent, at 1,028.08. But the Nasdaq Composite Index was down 1.81 points, or 0.09 percent, at 2,022.42.
In July, sales of new homes rose at their fastest pace in 10 months.
While the home sales data had a muted impact on the broader market, it proved bullish for the sector, driving the Dow Jones U.S. Home Construction index up 2.9 percent.
Among the index components, D.R. Horton Inc advanced 5.8 percent to $13.80, while Beazer Homes climbed 4.5 percent to $4.21.
Durable goods orders jumped 4.9 percent, the largest advance since July 2007, the government said. Excluding transportation, durable goods rose 0.8 percent, slightly below expectations.
Still, industrial stocks dipped, in part because Chinese officials said they would take steps to curb overcapacity.
The Dow Jones Heavy Construction index fell 1.9 percent, with Jacobs Engineering down 3.2 percent at $44.94.
One of the top drags on the Nasdaq was Apple Inc, down 1 percent at $167.73.
Earlier, Nokia said it would try to tackle Apple's iPhone in the smartphone market with a bet on Linux software, according to industry sources. Nokia's U.S.-listed stock was up 3.8 percent at $13.10.
In earnings-related activity, Williams-Sonoma shot up 12.5 percent to $17.41 after it posted a surprising second-quarter profit.
Topping the Nasdaq's list of biggest percentage decliners was the stock of Concurrent Computer, which sank 16.6 percent to $4.69 after the company said it expects lower spending trends to continue in the first quarter. (Editing by Jan Paschal)