The durable-goods print was broadly in line with expectations: economists surveyed by The Wall Street Journal had forecast a 3% drop in February from the prior month.

Excluding transportation, orders fell a worse-than-expected 1%, the sharpest drop in a year.

Economists had expected durable goods orders to drop by 3.0% compared to the 4.7% jump that had been reported for the previous month.

Wells Fargo's Sam Bullard noted in a preview that the transportation component could have the largest impact on headline orders.

New orders excluding defense fell 1.9 percent on the month, as orders of nondefense aircraft and parts and nondefense capital goods both fell significantly in February.

Shipments of core capital goods, a category used to help determine quarterly economic growth, dipped 1.1% after a revised 1.3% decline in January.

Obama Administration Drops Atlantic Drilling Plan
It drew instant opposition from seaside and tourist communities in all those states, including Myrtle Beach and Charleston in SC . The Department of the Interior is expected to announce full details of the new measures some time this week.

US stocks fell on the data and weaker oil prices.

In a separate economic report, the number of Americans who applied for unemployment benefits in the mid-March was little changed at 265,000, reflecting the low level of layoffs taking place across the economy.

The Commerce Department said orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, declined 2.8 per cent last month after a downwardly revised 4.2 per cent increase in January.

The central bank raised its interest rate for the short term this past December for just the first time in close to 10 years.

Overall the United States manufacturing sector appears steady, noted Ian Shepherdson of Pantheon Macroeconomics. Tepid global markets, the dollar's advance and a slump in commodity prices also have led overseas customers to pare bookings as manufacturing remains a weak spot of the economy. But most of the report was a disappointment, indicating that companies still aren't spending. While last month's report was an encouraging sign that the manufacturing sector was regaining lost momentum, this month's report is equally discouraging. The Commerce Department is due on Friday to release its final fourth-quarter GDP estimate.