Stocks edged lower on Tuesday after stocks had their best week in two years last week and traders waited for direction from U.S. manufacturing data due later in the session.

The Commerce Department releases May factory orders data at 10 a.m. Economists in a Reuters survey expect a rise of 1.0 percent compared with a 1.2 percent drop in the prior month.

Equities had rallied for five straight days for a 5.6 percent gain on the S&P, rebounding from weakness over the past two months. Moves to avert a debt crisis in Europe and surprisingly strong regional business data helped lift some of the gloom on Wall Street.

You've got to wait until factory orders comes out and that will give you a little more direction if they are actually going to sell them off or if this is kind of a wiggle down opening, said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

The Dow Jones industrial average <.DJI> dropped 5.94 points, or 0.05 percent, to 12,576.83. The Standard & Poor's 500 Index <.SPX> shed 2.34 points, or 0.17 percent, to 1,337.33. The Nasdaq Composite Index <.IXIC> gained 0.37 points, or 0.01 percent, to 2,816.40.

Volume is expected to remain low in the holiday-shortened week, which could increase volatility. Markets were closed on Monday for the Independence Day holiday.

The bottom line is when you have light volume, the gyrations are going to be exaggerated on both sides of the equation, said Peter Cardillo, chief market economist at Avalon Partners in New York.

Southern Union Co advanced 3.1 percent to $41.62 after pipeline operator Energy Transfer Equity LP raised its bid to buy its rival by 21 percent to about $5 billion, trumping the $4.9 billion bid offer from Williams Companies Inc .

Immucor Inc surged 30.8 percent to $27.11 after the diagnostics firm said it agreed to be acquired by private equity group TPG Capital for a fully diluted equity value of $1.97 billion.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)