* Investors look to cash in on previous session's rally
* Brazil Bovespa slips 0.2 pct, Mexico IPC down 0.1 pct
By Rachel Uranga and Asher Levine
MEXICO CITY/SAO PAULO, March 14 (Reuters) - Latin American stocks fell on Wednesday as investors locked in profits after a bumper previous session and held back from new investments ahead of U.S. data expected on Thursday.
The MSCI Latin American stock index lost 0.89 percent after logging its second sharpest gain this year in the previous session.
Brazil's Bovespa hit an 11-month high on Tuesday after the U.S. Federal Reserve upgraded its outlook to say it expected "moderate" growth in the world's largest economy.
The Fed also announced that most of the largest U.S. banks passed their annual stress test, showing they had adequate capital to protect against losses.
Investors on Wednesday sold shares and locked in profits, driving the Bovespa down 0.20 percent to 68,257.
Mining giant Vale lost 1.18 percent and the country's biggest homebuilder, PDG Realty, slid 3.1 percent.
"We had an exaggeration yesterday," said Joao Simoes, who helps oversee 570 million reais ($315 million) at Duna Asset Management in Sao Paulo. "With stocks like Vale rising 5 percent in one day, what's behind it to justify that? Not much."
Despite Wednesday's losses, a technical momentum indicator, known as the MACD, posted a bullish cross, suggesting the index could be ready to start a new rally.
"We are in a bull market," said Alexandre Ghirghi, a partner with Metodo Investimentos in Sao Paulo. "We may see some profit-taking along the way, but in the medium term the market is getting stronger."
Mexico's IPC index fell for the third session in four, slipping 0.13 percent to 37,971.
America Movil, the telecommunications company controlled by billionaire Carlos Slim, lost 1.13 percent and mining company Industrias Penoles dropped 1.8 percent.
The IPC has been trading near record highs and has gained about 2.5 percent this year, largely on upbeat economic data from the United States, Mexico's largest trading partner.
Some analysts doubt, however, that benefits from expectations of an improved U.S. economy will be enough to lift shares beyond the short-term.
"People are waiting to see more data to validate whether or not this rise is justified," said Gerardo Roman, head of stock trading at Mexico City brokerage Actinver. "The justification to convince the markets has not been fundamental, it's been cheap cash."
Investors on Thursday will eye weekly first-time U.S. jobless claims and two regional surveys of business activity for signs that the economic recovery's momentum is continuing.
Emerging markets have been fueled this year by an injection of cash provided by the European Central Bank and others seeking to lift lagging economies with cheap loans.
Technical analyst Fanuel Fuentes said Mexico's index showed no clear tendency and would likely continue to trade within narrow ranges in the short term. The IPC has been trading between around 37,300 and 38,300 this month.
Chile's IPSA index gained for a fifth consecutive session, adding 0.50 percent to 4,551, bolstered by a rise in shipping company Vapores, which jumped 12 percent.
The IPSA rose in part because traders tried to recover some of the gains made on Wall Street, which closes several hours earlier and posted its best day of the year during the previous session.
Energy generator Endesa added 1.75 percent and Chile's No. 3 private bank, BCI, jumped 2.78 percent.