Updated from 1:52 p.m. EDTA strong rebound in manufacturing activity was evident Wednesday in the sharp increase of durable goods orders in June. The report confirmed a still-brightening economic picture, but also that the Federal Reserve is not about to relax its campaign to raise short-term rates. Adding to the bright economic picture, the Federal Reserve's beige book, a survey of economic conditions in the Fed's 12 districts, showed broad strength continuing through the middle of July. Stocks and bonds gained ground as the report also showed inflation pressures remained contained. But if anyone still had any doubts about the Fed's will to lift interest rates, the report that new-home sales unexpectedly jumped to new highs in June likely silenced the end-of-rate hikes theories. According to the Commerce Department, orders for durable goods -- which include such items as aircraft, computers and washing machines -- rose 1.4% in June, and were up 2.6% without accounting for a drop in the volatile transportation sector. The gains were well above Wall Street's expectations for overall orders to dip 1.0% in the month, and for orders ex-transportation to rise 1.0%. May orders also were revised higher by 0.9% to 6.4%. In June, the backlog of orders increased by 2.6%. Outside of the defense industry and aircraft, there was a sharp rise of 3.8% in business orders for capital goods, following weakness since January. This "provides reassurance that overall capital spending is likely to resume the growth pace seen from mid-2003 through last year," according to Bank of America senior economist Peter Kretzmer. "Paced by much stronger orders of machinery, computers and electronics, the June orders rise points to continued robust capital spending on technology items later in the year." Bonds came under renewed selling pressure after the durable goods data but recovered some ground after the Beige Book report noted no recent rise in inflationary pressures. The benchmark 10-year Treasury bond, previously down 7/32 was recently down 5/32 and the yield at 4.25%. Major averages also gained after the Fed's report; as of 2:45 p.m. EDT, the Dow Jones Industrial Average was up 0.5%, behind strength in Boeing ( BA), while the S&P 500 was up 0.3% and the Nasdaq Compositeup 0.4% behind strength in stocks such as Amazon.com ( AMZN) and despite pronounced weakness in InfoSpace ( INSP) after its disappointing guidance.