The Standard & Poor's 500 Index crept to a fresh intraday record as a second estimate showing the US economy contracted in the first quarter failed to deter expectations that the recovery is gathering steam.
The world's largest economy shrank at a 1.0 per cent annual rate in the first three months of 2014, according to a second estimate by the Commerce Department.
"The headline figure was weaker than expected, but it was mainly due to slower inventory growth, which bodes well for future growth, future orders, new orders," Jeffrey Saut, chief investment strategist at Raymond James Financial in St Petersburg, Florida, told Reuters.
Economists are forecasting a strong rebound in the current quarter with some estimates seeing growth near a 4 per cent rate.
In the final hour of trading in New York, the Dow Jones Industrial Average gained 0.27 per cent, the S&P 500 and the Nasdaq Composite Index each added 0.40 per cent. Earlier in the day, the S&P 500 climbed to a record high of 1,917.69.
Gains in shares of Merck, up 2 per cent, and United Health, up 0.9 per cent, helped propel the Dow higher.
The US dollar however fell as the GDP data also underlined expectations that the US Federal Reserve will not raise interest rates any time soon.
Separately, Labor Department data showed the number of Americans filing new claims for unemployment benefits declined more than expected last week, falling 27,000 to a seasonally adjusted 300,000.
And US pending home sales rose 0.4 per cent in April, after a 3.4 per cent increase in March, according to a National Association of Realtors report.
Lawrence Yun, NAR chief economist, said he expects home sales to rise.
"Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective home buyers' confidence," Yun said in a statement. "An uptrend in closed sales is expected, although some months will encounter a modest setback."
In Europe, the Stoxx 600 Index edged higher from the previous close to finish the day at 344.51. The UK's FTSE 100 rose 0.3 per cent. Germany's DAX finished the session little changed from the previous close, as did France's CAC 40.
Shares of Man Group climbed 5 per cent, after the UK hedge fund manager said it is in talks to buy Numeric Holdings, a Boston-based fund manager.
Euro-zone bonds climbed, pushing yields to record lows in some countries including Austria, Belgium and France amid rising expectations that the European Central Bank will announce fresh stimulus measures next week.
Italy sold 7.5 billion euros (US$10.2 billion) of bonds maturing in five and 10 years. The Rome-based Treasury allotted 3 billion euros of debt due in September 2024 at an average yield of 3.01 per cent, the lowest for similar-maturity securities since Bloomberg started compiling the data in 1991.