Overall orders, however, were unexpectedly pulled down by a plunge in the volatile category of civilian aircraft and parts, Commerce Department data showed on Friday.

New durable goods orders excluding transportation jumped 2.8 percent last month, the largest rise since December 2007, after increasing 1.7 percent in February.

Analysts polled by Reuters had expected new orders excluding transportation to rise 0.7 percent.

Separately, the department said new home sales for March surged 26.9 percent, the largest advance since April 1963, to a 411,000 unit annual rate to break a four-month slide.

Analysts polled by Reuters had expected sales to increase to a 330,000-unit rate.

"These are some large numbers. I think the market can go into the weekend comfortable that the US recovery is still going full swing," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

US stocks extended gains after the home sales data, while Treasury debt prices fell to session lows. The US dollar rose against the euro and the yen.

The surge in sales of newly built single-family homes last month likely reflected a rush by consumers to take advantage of a homebuyer tax credit. It offered hope the housing recovery, which had stalled in recent months, was back on track.

"We are at a point in housing where we are in a recovery mode, but there are still concerns about the speed and sustainability of it. We will probably not see real strength until 2012," said Kim Whelan, economic analyst at Wells Fargo Securities in Charlotte, North Carolina.

Overall durable goods orders fell 1.3 percent last month, the biggest drop since August, following an upwardly revised 1.1 percent gain in February. Analysts polled by Reuters had forecast orders rising 0.3 percent last month after February's previously reported 0.9 percent increase.

The drop in overall orders reflected a 67.1 percent tumble in non-defense aircraft and parts orders after they rose 32.7 percent the previous month. US plane maker Boeing Co. received 43 orders for aircraft last month, slightly below 47 in February, according to information posted on its website.

Details of the March report were upbeat. Motor vehicle and parts orders rose 2.5 percent after a 1.0 percent fall the prior month. Defense aircraft orders rose 2 percent last month following a 20.6 percent drop in February.

Durable goods orders are a leading indicator of manufacturing activity, which in turn provides a good measure for overall business health. Orders for long-lasting goods have been rising as businesses replenish inventories, keeping the country's manufacturers busy.

Manufacturing is leading the economy out of the depths of the worst downturn since the Great Depression and the recovery is starting to spill over to other segments.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, surged 4 percent in March, building on the prior month's 2.1 percent increase, the Commerce Department said.

The increase was well above market expectations for a 1.4 percent rise.

"The capex recovery is running at full speed. Firms are becoming increasingly confident in investing in capital goods.

The fact is companies seem confident that growth in final demand will be sustained," said Zach Pandl, US economist at Nomura Securities International in New York.

Goods ranging from machinery, computers and communications equipment also saw hefty increases in orders last month.

Durable goods inventories rose for third straight month, while shipments - which go into the calculation of gross domestic product - increased after two months of declines.

Unfilled orders fell after two straight months of gains.