* 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 on Wednesday, led by a decline in Apple shares, while other leading indexes 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 Apple grappled with a possible security breach of its iCloud service a week before the launch of its new iPhone.
Rival Samsung Electronics Co Ltd, meanwhile, launched a virtual reality headset for its new Galaxy Note 4 phablet using technology from Oculus VR, a company that Facebook Inc acquired for $2 billion.
Apple's decline weighed on the technology sector, which lost 0.7 percent and was the worst performing of the 10 major 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 the day.
Stocks had gained earlier after officials from Ukraine and Russia said they were close to an agreement to stop fighting in eastern Ukraine, but confusion lingered as Russia announced plans to carry out military exercises.
"We're due for a bit of a breather in the market given how strong it has been since a month ago or so, and now, I think people want more confidence that the economy is strong enough to stand on its own feet," said Mike Levine, portfolio manager at OppenheimerFunds in New York.
Airline shares fell after Delta Airlines, down 5.5 percent to $38.69, trimmed its operating margin forecast and said its international passenger traffic fell slightly in August. 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 or 0.14 percent, to 17,090.96. The S&P 500 lost 0.18 points or 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 investor anxiety, rose 0.4 percent to 12.30.
The latest flurry of data pointed to continued recovery in the economy. New orders for manufactured goods increased a record 10.5 percent in July, and August auto sales were unexpectedly strong, due in part to heavy discounting.
The Federal Reserve reported in its Beige Book that six of the central bank's 12 districts showed moderate economic growth in recent weeks.
Housing stocks were weak, weighed down by a 3.6 percent decline in Toll Brothers (NYSE: TOL - news) to $34.35 after the largest U.S. luxury homebuilder posted quarterly results. The PHLX housing index lost 1.3 percent. (Editing by Bernadette Baum and Nick Zieminski)