* Factory orders increase in July
* Automakers post strong August sales
* Airlines shares fall with Delta
* Dow up 0.14 pct, S&P flat, Nasdaq off 0.44 pct (Updates to afternoon, adds detail on Apple shares)
By Akane Otani
NEW YORK, Sept 3 (Reuters) - The Nasdaq dropped onWednesday, led by a decline in Apple shares, while other leadingindexes were little changed.
Apple shares were down 4.1 percent at $99.07, heading toward their worst percentage decline since Jan. 28.
At least one brokerage mulled downgrading the stock as Applegrappled with a possible security breach of its iCloud service aweek before the launch of its new iPhone.
Rival Samsung Electronics Co Ltd, meanwhile,launched a virtual reality headset for its new Galaxy Note 4phablet using technology from Oculus VR, a company that FacebookInc acquired for $2 billion.
Apple's decline weighed on the technology sector,which lost 0.7 percent and was the worst performing of the 10major S&P groups. It also weighed down the benchmark S&P index,which had hit a record intraday high of 2,009.28 earlier in theday.
Stocks had gained earlier after officials from Ukraine andRussia said they were close to an agreement to stop fighting ineastern Ukraine, but confusion lingered as Russia announcedplans to carry out military exercises.
"We're due for a bit of a breather in the market given howstrong it has been since a month ago or so, and now, I thinkpeople want more confidence that the economy is strong enough tostand on its own feet," said Mike Levine, portfolio manager atOppenheimerFunds in New York.
Airline shares fell after Delta Airlines, down 5.5percent to $38.69, trimmed its operating margin forecast andsaid its international passenger traffic fell slightly inAugust. Shares (Frankfurt: DI6.F - news) of American Airlines Group Inc fell 3.4 percent to $39.12.
The Dow Jones industrial average rose 23.4 points or0.14 percent, to 17,090.96. The S&P 500 lost 0.18 pointsor 0.01 percent, to 2,002.1. The Nasdaq Composite dropped 20.42 points or 0.44 percent, to 4,577.77.
The CBOE volatility index, a barometer of investoranxiety, rose 0.4 percent to 12.30.
The latest flurry of data pointed to continued recovery inthe economy. New orders for manufactured goods increased arecord 10.5 percent in July, and August auto sales wereunexpectedly strong, due in part to heavy discounting.
The Federal Reserve reported in its Beige Book that six ofthe central bank's 12 districts showed moderate economic growthin recent weeks.
Housing stocks were weak, weighed down by a 3.6 percentdecline in Toll Brothers (NYSE: TOL - news) to $34.35 after the largestU.S. luxury homebuilder posted quarterly results. The PHLXhousing index lost 1.3 percent. (Editing by Bernadette Baum and Nick Zieminski)
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