UPDATE 1-Philly Fed factory activity contracts in January

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NEW YORK, Jan 17 (Reuters) - Factory activity in the U.S. mid-Atlantic region unexpectedly contracted in January, mirroring weakness in a report earlier in the week covering New York state and casting doubt over the strength of the manufacturing sector.

The Philadelphia Federal Reserve Bank said on Friday its business activity index fell to -5.8 from 4.6 the month before. That was well below economists' expectations for a rise to 5.8, according to a Reuters poll.

Any reading above zero indicates expansion in the region's manufacturing. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware.

It is seen as one of the first monthly indicators of the health of U.S. manufacturing leading up to the national report by the Institute for Supply Management.

"Overall this number is disconcerting," said Kathy Lien, managing director of FX strategy at BK Asset Management in New York. "It shows that the manufacturing sector is losing momentum."

Graphic: Northeast manufacturing: Philly Fed and Empire State http://link.reuters.com/dyq93t

Investors were unfazed, with indexes showing little reaction to the data after U.S. stocks hit a five-year high at the open after better-than-expected results from online marketplace eBay and as data showed first-time claims for unemployment benefits dropped to a five-year low.

The new orders index fell to -4.3 from 4.9. The employment component worsened, falling to -5.2 from -0.2 in December.

Survey respondents' view on the coming months perked up, however, with the gauge of business conditions for the next six months rising to 29.2 from 23.7.

(Reporting by Edward Krudy; Editing by Chizu Nomiyama)