* July consumer spending picks up slightly
* Major U.S. indexes set to end the week higher
* Freeport-McMoRan rises after Icahn discloses stake
* Indexes: Dow down 0.03 pct, S&P up 0.18 pct, Nasdaq up 0.39 pct (Adds details, changes comment, updates prices)
By Tanya Agrawal
Aug 28 (Reuters) - U.S. stocks were mixed on Friday as investors were wary of taking big positions into the weekend after days of tumultuous trading that featured both the market's worst day in four years and biggest two-day gain since the financial crisis.
Even so, the three major U.S. indexes looked set to end the week higher after a brutal selloff early in the week sparked by worries about the health of the Chinese economy.
"Today's selloff is normal after the two enormous upward days that we had," said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin, Texas.
"A lot of investors are rebalancing their portfolios before going into the weekend and the dips that we saw earlier in the week were good buy opportunities."
The market turmoil, that saw the Dow lose more than 1,000 points in intraday trading on Monday, has led to strategists cutting their end-of-year forecasts for indexes. Data for August 20-26 showed a record $28 billion in outflows from equity funds.
Strong gains over the last two days suggested that the worst might be over, but the CBOE Volatility index indicated that the market was still more volatile than usual.
The index - popularly known as the "fear index" - was up 2 percent at 26.67. It soared to a more than 6-year-high earlier in the week.
"The VIX average for the year has been about 15 and I definitely expect it to be above 20 in the short-term," said Frederick.
In China, stocks jumped more than 4 percent for the second day as authorities announced that pension funds managed by local governments will start investing 2 trillion yuan ($313 billion) as soon as possible in stocks and other assets.
At 11:30 a.m. ET (1530 GMT) the Dow Jones industrial average was down 4.31 points, or 0.03 percent, at 16,650.46, the S&P 500 was up 3.57 points, or 0.18 percent, at 1,991.23 and the Nasdaq composite was up 18.82 points, or 0.39 percent, at 4,831.52.
Six of the 10 major sectors were lower, with the utilities index's 0.8 percent fall leading the decliners. The energy index jumped 2 percent a day after oil prices jumped the most in a day since 2009.
Data released on Friday showed U.S. consumer spending picked up a bit in July as households bought more automobiles, offering further evidence of strength in the economy.
Global stock market volatility has raised doubts over when the U.S. Federal Reserve will raise rates, particularly after New York Fed chairman William Dudley said on Wednesday the case for a September hike now appeared less compelling.
Despite the stronger-than-expected data released earlier this week, traders gave a one-in-four chance that the Fed would increase interest rates in September.
The Fed has said it will raise interest rates only when it sees a sustained recovery in the economy. While the labor market has continued to strengthen, inflation remains below the Fed's 2 percent target.
"We don't think the Fed will raise rates this year. While the data has been improving, it doesn't show an over-heated economy, inflation remains low and we need to see the effect of low energy prices," said Jeff Carbone, co-founder and managing partner of Cornerstone Financial Partners.
Freeport-McMoRan shares were up 2 percent to $10.40 after activist investor Carl Icahn disclosed an 8.5 percent stake in the company.
Autodesk was down 4.9 percent at $47.54 after the maker of computer-aided design software cut its full-year profit and revenue forecast for the second time this year.
Big Lots was jumped 14.9 percent to $48.25 after its second-quarter profit beat expectations and the company raised its full-year adjusted profit forecast.
Advancing issues outnumbered decliners on the NYSE by 1,919 to 1,018. On the Nasdaq, 1,863 issues rose and 790 fell.
The S&P 500 index showed one new 52-week high and no new lows, while the Nasdaq recorded 13 new highs and 12 new lows. (Reporting by Tanya Agrawal; Editing by Saumyadeb Chakrabarty)