* Durable goods post largest gain in two years * New home sales rise at fastest pace since Sept 2008 * Dow dips 0.2 pct, S&P 500 off 0.3 pct, Nasdaq off 0.4 pct (Updates to early afternoon, changes byline)
By Ryan Vlastelica
NEW YORK, Aug 26 (Reuters) - U.S. stocks declined slightly on Wednesday, as investors took a breather after a strong rally earlier in the week, despite strong reports on new home sales and durable goods.
For the third consecutive day, equities briefly bounced after favorable news, but the gains fizzled.
"I cannot say I'm surprised if we do nothing much late in August, when the trading volume is nothing, especially when we've run up as much as we have," said Linda Duessel, market strategist at Federated Investors in Pittsburgh.
The S&P 500 is on track for its sixth straight monthly rise. The benchmark index has gained about 52 percent from 12-year lows set in early March.
"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 shed 15.57 points, or 0.16 percent, to 9,523.72. The Standard & Poor's 500 Index fell 3.05 points, or 0.30 percent, to 1,024.95. The Nasdaq Composite Index dropped 8.24 points, or 0.41 percent, to 2,015.99.
In July, sales of new homes rose to 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 2.6 percent to 307.00. Among the index components, D.R. Horton Inc surged 5 percent to $13.70 while Beazer Homes climbed 3.2 percent to $4.16.
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 Wednesday, in part because Chinese officials said they would take steps to curb overcapacity. The Dow Jones Heavy Construction index fell 2.1 percent, with Jacobs Engineering down 3.6 percent at $44.73.
One of the top drags on the Nasdaq was Apple Inc, down 1.4 percent at $167.09.
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 3.7 percent at $13.09.
In earnings-related activity, Williams-Sonoma shot up 10.3 percent to $17.07 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 18.7 percent to $4.57 after the company said it expects lower spending trends to continue in the first quarter. (Editing by Jan Paschal)