Yellen acknowledged that tightening financial conditions and uncertainty about China posed risks to the U.S. economy, but told Congress she does not expect the central bank to reverse the rate hike program it began in December.
The Fed expects economic growth to pick up in the current quarter, which would allow it to pursue its plan of "gradual" adjustments to monetary policy, she said.
Fears of a China-led global economic slowdown and oil's steep slide since the Fed raised rates in December have dampened the market's expectations for a hike in coming months.
"What Yellen said has been taken positively," said Richard Sichel, chief investment officer of Philadelphia Trust Co in Philadelphia.
"Stocks in general are cheaper now than they were three days ago or three months ago, so there's an opportunity to step in."
Stock markets have sagged under a double whammy of the uncertainty surrounding monetary policy and steep decline in commodity prices, while corporate results and economic data offered little respite.
At 12:46 a.m. ET the Dow Jones industrial average <.DJI> was up 54.24 points, or 0.34 percent, at 16,068.62. The index wobbled under the weight of Disney's (>> Walt Disney Co) 3.6 percent fall.
The S&P 500 <.SPX> was up 18.74 points, or 1.01 percent, at 1,870.95 and the Nasdaq Composite index <.IXIC> was up 72.45 points, or 1.7 percent, at 4,341.21.
Eight of the 10 major sectors were higher, led by a 2.08 percent rise in the health sector <.SPXHC>. Tech stocks <.SPLRCT> were up 1.4 percent, set to snap a streak of three days of declines.
Facebook (>> Facebook Inc) was up 3 percent, while Microsoft (>> Microsoft Corporation) and Alphabet (>> Alphabet Inc) rose 1.5-2.5 percent.
Disney dropped nearly 4 percent to $88.97 after reporting lower profit at its ESPN sports network. The stock hit its lowest since October 2014.
Time Warner (>> Time Warner Inc) fell 1 percent to $62.73 after reporting as steeper-than-expected drop in revenue.
Akamai (>> Akamai Technologies, Inc.) soared 22.7 percent to $48.51 after the online content distributor's revenue beat estimates.
Advancing issues outnumbered decliners on the NYSE by 2,200 to 801. On the Nasdaq, 1,917 issues rose and 767 fell.
(Reporting by Abhiram Nandakumar in Bengaluru, Additional reporting by Sam Forgione in New York; Editing by Savio D'Souza)
By Abhiram Nandakumar