Wall Street was set for a third day of losses Thursday as jobless claims data failed to meet heightened market expectations, leaving investors to wonder if the economy can sustain a rally.

New U.S. jobless claims fell last week, according to a government report, but still came in above forecasts.

After a period of improvement, some analysts said the jobs numbers showed signs of stalling, a worry for investors.

The market was feeling pretty fearless and bulletproof, and when we're feeling that way, a disappointing data point has a greater effect, said John Kosar, director of research with Asbury research in Chicago.

S&P 500 futures fell 7 points and were 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 lost 35 points, and Nasdaq 100 futures were off 12 points.

Concerns about a slowdown in Asia have also been on the rise. The Shanghai Composite index <.SSEC> is down more than 8 percent since the middle of March. It lost 1.4 percent on Thursday.

The economic numbers have been softening a little bit here in the U.S., but I also think people are looking to Asia and the weakness there, which is getting pretty profound, said Rick Fier, director of trading at Conifer Securities in New York.

The S&P 500 is up 11.8 percent this quarter, its best start to the year since 1998 and its best quarter since the third period of 2009.

Some investors are looking for a pullback early in the second quarter after the strong early run and as investors seek confirmation the economy is not about to slow.

What we are really keying on now is what happens in the first week in April, said Fier. Everybody remembers last year at this time and 'sell in May and go away' was a big trade that worked, he said, referring to the old stock market adage.

Roche Holding AG hiked its cash bid for U.S. gene sequencing company Illumina Inc to $6.7 billion, the Swiss drugmaker said as it sought to win over shareholders before Illuminant's annual meeting next month. Illumina rose 4.5 percent to $52.13.

Red Hat Inc's quarterly profit beat expectations for the fifth straight quarter on higher subscription revenue. The business software maker also said it will buy back $300 million of its shares. The shares gained 7.7 percent to $55.32.

Fossil Inc will replace Medco Health Solutions Inc in the S&P 500 as Express Scripts Inc acquires Medco in a deal expected to be completed soon. The date of the index change has yet to be announced.

Also on the mergers front, Pentair Inc
reached a $4.6 billion stock deal to absorb Tyco International Ltd's flow-control business, roughly doubling Pentair's size. The stock fell 0.4 percent to $46.12.

Best Buy Co Inc reported weaker-than-expected sales for the fourth quarter on Thursday, and said it has decided to close 50 big-box stores and to cut 400 jobs in corporate and support areas. The stock fell 3.5 percent to $25.70.

(The story is corrected to show jobless claims were above expectations)

(Reporting By Edward Krudy; editing by Jeffrey Benkoe)