The Dow Jones Industrial Average closed the day 192 points, or 1.2 percent ahead. The S&P 500 and Nasdaq also rose over 1 percent each.
The eyes and ears of Wall Street are on Yellen this week as she was giving testimony before the U.S. House of Representatives on Tuesday, followed by the Senate on Thursday. Under her predecessor Ben Bernanke, the Fed buoyed the stock markets with a stimulus policy of monthly bond purchases. But it has started to trim, or taper, the purchases in recent months as the economy appears to improve.
While U.S. economic growth has gained traction, "the recovery in the labor market is far from complete," Yellen told the House Financial Services Committee.
The dollar edged lower against the currencies of major U.S. trading partners and the yield on the benchmark 10-year Treasury note used in figuring mortgage rates and other consumer loans rose 5 basis points to 2.721 percent.