* Investors hesitant after rally; overshadows data
* Strong new home sales data lifts Home Depot, D.R. Horton
* Durable goods post biggest 2-year gain, but off forecast * Indexes end up just 0.01 pct to 0.04 pct

(Updates to close)

NEW YORK - Investors stayed cautious on Wednesday after a rally, leaving stocks little changed despite solid reports on new home sales and durable goods orders.

For the third consecutive day, equities bounced after favorable news, but the gains fizzled.

After a five-month run-up that has pushed 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 even as economic data points to improved demand.

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.

The Dow Jones industrial average .DJI rose 4.23 points, or 0.04 percent, at 9,543.52. The Standard & Poor's 500 Index .SPX added just 0.12 of a point, or 0.01 percent, to 1,028.12. The Nasdaq Composite Index .IXIC ended up just 0.20 points, or 0.01 percent, at 2,024.43.

In July, sales of new homes rose at their fastest pace in 10 months, the U.S. Commerce Department's data showed, but the impact on the broader market was muted as some market players said it has already been factored in. [ID:nN26259327]

But the data proved bullish for the housing sector, driving the Dow Jones U.S. Home Construction index .DJUSHB up 3 percent.

Among the index components, D.R. Horton Inc (DHI.N) advanced 5.7 percent to $13.79 while Beazer Homes (BZH.N) climbed 5 percent to $4.23.

Home Depot Inc (HD.N), the largest home-improvement retailer and a Dow component, gained 0.9 percent to $27.57.

Durable goods excluding transportation rose 0.8 percent, below expectations, although overall durable goods orders posted the largest jump since July 2007, a separate Commerce Department report showed.

Industrial stocks tumbled, in part after China said it would take steps to curb overcapacity among steel and cement producers.

The Dow Jones Heavy Construction index .DJUSHV fell 1.8 percent, with Jacobs Engineering (JEC.N) down 2.8 percent at $45.10. US Steel Corp (X.N) fell 2.4 percent to $43.24.

One of the top drags on the Nasdaq was Apple Inc (AAPL.O), down 1.2 percent at $167.41.

Earlier, Nokia (NOK.N) said it would try to tackle Apple's iPhone in the smartphone market with a bet on Linux software, according to industry sources. [ID:nLQ358262] Nokia's U.S.-listed stock was up 4 percent at $13.13.
In earnings-related activity, Williams-Sonoma (WSM.N) shot up 11.3 percent to $17.21 after it posted a surprising second-quarter profit. [ID:nBNG459228]

Topping the Nasdaq's list of biggest percentage decliners was the stock of Concurrent Computer (CCUR.O), which sank 17.6 percent to $4.63 after the company said it expects lower spending trends to continue in the first quarter. [ID:nBNG355051]

Volume was light on the New York Stock Exchange, with only 1.02 billion shares changing hands, below last year's estimated daily average of 1.49 billion. On the Nasdaq, about 2.09 billion shares traded, also lower than last year's daily average of 2.28 billion.

Declining stocks slightly outnumbered advancing ones on the NYSE by a ratio of about 8 to 7. On the Nasdaq, though, the opposite trend prevailed: Advancing stocks outnumbered declining ones by a ratio of about 14 to 13. (Editing by Jan Paschal)

China U.S.