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Dumbest Moments in Business 2009...midyear edition

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NEW YORK (CNNMoney.com) -- Prices for long-term Treasury bonds fell Wednesday after economic reports on manufacturing and housing gave investors reason to seek higher returns in the stock market.

But short term notes fell after a Federal Reserve official suggested that interest rates could remain near zero for a few years.

The Institute for Supply Management's manufacturing index rose to 44.8 in June from 42.8 in the previous month. The improvement was slightly less than the 44.9 reading economists had forecast but was still seen as a positive sign for manufacturing.

Separately, the National Association of Realtors reported that pending home sales rose 0.1% in May. Economists surveyed by Briefing.com thought sales would hold steady after rising a revised 7.1% in April.

The reports raised hopes that an economic recovery could be in the works and encouraged investors to sell longer term bonds in favor of more risky bets in the stock market. The Dow Jones industrial average (INDU) closed up 57 points, or 0.7%, according to early tallies.

However, a report on the labor market came in worse than expected. Payroll firm ADP said private-sector jobs decreased by 473,000 in June, versus the 394,000 cuts expected.

The ADP report comes one day before the government releases its closely watched monthly jobs report. Economists think a total of 363,000 jobs were lost in June and that the unemployment rate rose to 9.6%.

Meanwhile, San Francisco Federal Reserve Bank President Janet Yellen said Tuesday that the central bank should be wary of boosting interest rates until the economy has regained some stability.

"It's not outside the realm of possibilities that the fed funds rate could stay at zero for the next couple of years," Yellen told reporters after a speech in San Francisco.

All financial markets are closed Friday for the Independence Day weekend.

Bond prices: The benchmark 10-year note was down 2/32 to 96-17/32, and its yield rose to 3.55% from 3.52% Tuesday.

The 30-year bond fell 7/32 to 98-12/32 and yielded 4.34%.

The 2-year note gained 4/32 to 100-5/32 and its yield was 1.06%.

The 3-month bill was unchanged at 0.17%.

Lending rates: In an ongoing sign of improved credit conditions, bank-to-bank lending rates remained near record lows.

The three-month Libor held slid Wednesday to 0.59% from 0.6% Tuesday, according to Bloomberg.com. The overnight Libor rate eased to 0.27% from 0.28%.

The London Interbank Offered Rate -- or Libor -- is a daily average of rates that 16 different banks charge each other to lend money. The closely watched benchmark is used to calculate adjustable-rate mortgages. More than $350 trillion in assets are tied to Libor.