U.S. stock index futures edged lower on Thursday as investors weighed the prospects of some solid U.S. economic data against increasing discord in Egypt and worries that a rally that may be losing steam.

Data on Thursday includes U.S. December factory orders and the Institute for Supply Management's (ISM) January non-manufacturing index, both at 10 a.m..

Factory orders are expected to have declined by 0.5 percent in December after rising 0.7 percent in November. December's non-manufacturing ISM index is expected to be read 57.0, about in-line with November.

Investors will look for clues on the health of the labor market ahead of Friday's key U.S. non-farm payrolls report in the weekly jobless claims data at 8:30 a.m. A Reuters poll shows claims are expected to drop to 420,000.

On the positive side for the market, good numbers will be seen as further indication of the growth of the economy, bad numbers will be seen as weather-influenced, said Rick Meckler, president of investment firm LibertyView Capital Management in New York.

Better-than-expected readings of economic growth might not be enough to dislodge investor worries about rising unrest in Egypt, where gunmen fired on anti-government protesters in Cairo. The fighting killed six and wounded more than 800 people, prompting new calls from Western powers for President Hosni Mubarak to start handing over power immediately.

The initial shock has already hit and it is going to take more meaningful developments there to influence markets the way it did when it first occurred, Meckler said.

However, if for some reason fighting breaks out on a very wide scale, or it appears to have some impact in terms of Suez Canal disruptions or if it spreads to other countries, you will have investors reassessing that, he said.

The S&P 500 <.SPX> started to look overbought for the second straight session after reaching 2 1/2-year highs on Tuesday as resistance near the 450 level for the PHLX Semiconductor Index <.SOX> suggested stocks were vulnerable to a correction.

S&P 500 futures slipped 1.9 points and were slightly below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures fell 13 7 points, and Nasdaq 100 futures fell 1.75 points.

Merck & Co fell 1.8 percent to $33.22 in premarket after the drugmaker forecast 2011 earnings below Wall Street forecasts and withdrew its longer-term profit view.

Retailers will also be in focus as companies post their January sales results. According to Thomson Reuters data, of the 11 of 28 retailers reporting sales so far, six have topped analyst expectations.

U.S. warehouse club operator Costco Wholesale Corp posted a higher-than-expected 9 percent rise in January sales at stores open at least a year.

(Editing by Padraic Cassidy)