The Commerce Department said Wednesday that orders for durable goods -- manufactured products expected to last at least three years -- increased 3.4 percent last month, much better than the 2 percent fall economists expected. It was the first advance after a record six straight declines and the strongest one-month gain in 14 months.

The department also reported that new home sales rose to a seasonally adjusted annual rate of 337,000 from an upwardly revised January figure of 322,000. The results, while better than the drop to 300,000 units that analysts expected, still were the second-worst on record. Even after the revision to January's results, the month remained the worst on records dating to 1963.

After initially rising on the better-than-expected government data, Wall Street dipped in afternoon trading. The Dow Jones industrial average, which surged 200 points earlier in the day, slipped about 20 points in afternoon trading and broader indicators also fell.

Last month's strength in durable goods orders was led by a surge in orders for military aircraft and parts, which shot up 32.4 percent. Demand for machinery, computers and fabricated metal products also rose.

Still, the rebound in both factory orders and new home sales may be temporary. Upticks in retail sales and housing starts last month, along with a private sector group's index of leading economic indicators dropping less than expected were welcomed, but none were viewed as sustainable given all the problems facing the economy. And a large drop in durable goods orders in January was revised even lower, bolstering estimates that February data represented a blip.

"The worst of the drop in (home) sales is over but a sustained recovery, still less price stability, is a way off still," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients.

He was even more skeptical of a rebound in durable goods. Noting the steep downward revisions in January and that half of last month's gains came from defense, Shepherdson said the rise in orders was welcome, but "much less impressive than it looks at first sight and it cannot possibly last."

RBS Greenwich Capital analyst David Ader agreed. "Durable goods was firmer than expected but with the caveats of downward revisions and the bounce ... coming on the heels of several months of weakness ... and we don't see an effort to interpret it as a sign the economic bottom is in," he wrote in a note.

Wall Street investors shook off an attack of nerves that wiped out a big early advance Wednesday and then barreled back into the market right before the close.

Weak demand during an auction of government debt stirred up worries about how easily Washington will be able to raise money to fund its economic rescue program, market analysts said. The fear in the market is that the government might not be able to easily raise the hundreds of billions of dollars it needs.

Investors gave an unexpectedly cool response to the note sale just a day after a $40 billion auction of 2-year notes suggested strong demand. The government is running up huge deficits in order to fund an array of plans to provide stimulus to the economy and support to the ailing financial system. Any suggestion that demand for U.S. government debt is weakening is a negative for stocks, simply because Wall Street has been relying so heavily on the government's rescue plans.

The surge of worry over the debt auction wiped out the market's early optimism in response to durable goods and home sales data.

analysts still warn that investors risk getting burned if they are too quick to ratchet up expectations about the pace of a recovery in the market or the economy.

Big problems still have to be resolved before the economy can untangle itself from the deep recession. The nation's unemployment rate of 8.1 percent is the worst since the difficult recession of the early 1980s.

And home prices are still falling in many areas even as sales show some tentative signs of stability. That puts homeowners at risk of owing more on their homes than they are worth. That in turn could bring more troubles for banks already saddled with bad mortgage debt.

Oil fell $1.21 to settle at $52.77 a barrel on the New York Mercantile Exchange.