The rebound reported by the Commerce Department came after orders for costly manufactured durable goods dropped by 4.5 percent in June from the month before.

The 8.7 percent increase in orders for durable goods -- items expected to last at least three years -- was the largest since a 9.2 percent advance in October. July's performance was far stronger than what analysts were predicting. Their forecasts ranged from a 1.4 percent advance to a 2.7 percent gain.

The strength in July was broad based, with new orders rising for virtually every category tracked, except for electrical equipment and appliances, where orders went down.