The Federal Reserve said the economy was now contracting at a more moderate pace, as it left interest rates at the current range of zero to 0.25 percent, as expected, at the close of its two-day policy meeting.
News from the hard-hit housing market remained mixed, however, underlining the challenges to an economic recovery.
The Commerce Department reported that new orders for long-lasting U.S. manufactured goods rose by 1.8 percent in May, surprising analysts who had expected a decline.
Manufacturing accounts for about one-third of the economy, and provides a good barometer for overall business health.
The data is another positive sign for the U.S. economy, said Brian Kim, a currency strategist at UBS in Stamford, Connecticut.
U.S. stocks ended the session mixed, with earlier gains dented by Fed's comments that the economy would remain weak for a time. Treasury debt sold off on disappointment that the U.S. central bank did not announce any boost to its emergency program to purchase government bonds, part of its efforts to keep borrowing costs low and spark growth.
The rise in orders for durable goods in May was the third gain in four months, and followed a revised 1.8 percent increase in April.
Analysts polled by Reuters had forecast durable goods orders would decline 0.6 percent last month.
New orders excluding transportation advanced 1.1 percent last month, compared with a forecast for a 0.4 percent decline, buoyed in part by a 7.7 percent rise in new machinery orders. This was the largest percentage increase in that category since March 2008, the Commerce Department said.
New orders excluding defense were 1.4 percent higher, versus a Reuters' poll prediction for a 0.4 percent drop.
More importantly, non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, jumped 4.8 percent in May, the largest gain since September 2004. May's sharp rise compared with forecasts for a 0.6 percent drop and after a revised 2.9 percent April fall.
The numbers point to a stabilization, but certainly not a robust recovery, said Keith Hembre, chief economist at First American Funds in Minneapolis.
A report on single-family home sales also highlighted the continuing economic weakness , with the Commerce Department, reporting that sales slipped 0.6 percent last month to a 342,000 annual pace. The median sales price, however, rose in May.
Economists polled by Reuters had forecast sales would notch a 360,000 rate. Last month's pace also remained far below the 509,000 level of May 2008.
The overall level of sales is still very soft. We're stabilizing, but we still have some hurdles to overcome before we see a solid recovery in housing, said Gary Thayer, senior economist at Wells Fargo Advisors, St. Louis.
The median sales price rose to $221,600 from $212,600 in April and was the highest since December, when it was $229,600. The median marks the half-way point, with half of all houses sold above that price level and half below.
A separate report showed that U.S. mortgage applications climbed last week from a seven-month low, the Mortgage Bankers Association said.
Demand for home loans rose after four straight weekly declines, as U.S. mortgage rates dipped and more borrowers applied to buy houses as well as refinance.
The trade group's seasonally adjusted mortgage applications index, which includes both purchase and refinance loans, rose 6.6 percent last week.
(Additional reporting by Pedro da Costa and Rachel Chang in New York; Editing by Leslie Adler)