While another report on Tuesday showed new home sales slipped in November, sales in October were revised to show the highest pace in more than five years. In addition, house prices rebounded, underscoring the economy's improving fundamentals.

"We are coming out of the shadows of the Great Recession in many ways," said Robert Dye, chief economist at Comerica in Dallas.

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The Commerce Department said durable goods orders jumped 3.5 percent last month as demand increased for a range of goods from aircraft to machinery and computers and electronic products.

The increase, which outpaced economists' expectations for a 2 percent rise, more than reversed a drop in October. Excluding transportation, orders recorded their largest gain in six months.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, surged 4.5 percent. The increase snapped two straight months of declines and was the largest advance since January.

The increase in these so-called core capital and overall durable goods orders suggested strength in manufacturing and was further evidence of a firming economic growth outlook.

It narrows the gap with sentiment surveys that have offered a more upbeat view of manufacturing than government data.

"Sentiments were showing things were good but not the hard numbers. Things seemed to have turned now," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. "Businesses going into 2014 are more confident in their outlook."

From consumer spending to employment and trade, the foundations appear to be in place for sustained and strong economic growth in 2014.

In a second report, the Commerce Department said new home sales fell 2.1 percent to a seasonally adjusted annual rate of 464,000 units. However, October's sales were revised to a 474,000 unit pace, which was the highest level since July 2008.

Despite the fall, home sales retained the bulk of the previous month's 17.6 percent increase.

The reports are the latest to support the U.S. Federal Reserve's decision last week to start trimming back its monthly bond purchases from January, a process which is likely to continue for much of next year.

GROWTH OUTLOOK BRIGHT

U.S. Treasurys prices fell with benchmark yields hovering near three-month highs as investors trimmed their bond holdings in thin trade before Christmas. U.S. stocks were little changed, while the dollar rose marginally against a basket of currencies.

The durable goods orders report showed that shipments of core capital goods, which are used to calculate equipment spending in the government's measure of gross domestic product, increased 2.8 percent last month.

That was the largest rise since March 2012, prompting economists at Goldman Sachs raised their fourth-quarter GDP estimate by a tenth of a percentage point to a 2.4 percent annual rate. Shipments had dropped in September and October.

Manufacturing is being boosted by the housing market recovery through demand for building materials and household appliances. Home resales momentum has, however, slowed somewhat since the summer because of higher mortgage rates.

Applications for home mortgages fell for a second week to hit a 13-year low last week, another report showed.

Refinancing activity is also ebbing, which means the cycle of people lowering their monthly housing costs appears to be petering out.

But home sales are expected to accelerate next year, driven in part by employment gains. Continued recovery in household formation from multi-decade lows, against a backdrop of lean housing inventory, is also expected to boost activity.

"While the backup in mortgage rates could put a temporary dent in the pace of sales, continued job gains, as well as a return to more normal rates of household formation, should help to underpin housing demand," said Omair Sharif, an economist at RBS in Stamford, Connecticut.

The median price of a new home hit a seven-month high in November and was more than 10 percent higher than a year earlier.

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