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US futures off highs after Yellen testimony

U.S. stock index futures pointed to a higher open on Wednesday after a very volatile week so far, as investors digested the written testimony from Federal Reserve Chair Janet Yellen.

In her prepared remarks, Yellen said that, if the economy were to disappoint, a lower path of Fed funds rates would be appropriate. She also said that near-term inflation remains low due to falling energy prices, but that the FOMC expects inflation to reach 2 percent in the medium term

Dow futures held about 66 points higher after the testimony's release, after briefly gaining 150 points. Yellen is scheduled to testify in front of Congress Wednesday and Thursday.

Traders work on the floor of the New York Stock Exchange.
Getty Images
Traders work on the floor of the New York Stock Exchange.

But her bigger audience will be world financial markets, rattled by the fact that the Fed's forecast continues to show rate hikes as markets gyrate over fears of a weakening world outlook and divergent central bank maneuvering.

She begins speaking before the House Committee on Financial Services at 10 a.m. ET Wednesday.

Other data due for release on Wednesday includes the Federal Budget at 2:00 p.m. ET.

"This will be one of the more closely watched testimonies in some time as the market tries to gauge whether March is still in play for another Fed rate increase. Given the lack of any real calming in the markets, we think the odds of Yellen heavily promoting a March move are slim," said economist at RBC Capital Markets, Cathal Kennedy.

European stocks rallied on Wednesday ahead of Yellen's testimony, after two days of harsh selling, where banks caught the brunt of the bearish sentiment.

The pan-European STOXX 600 surged over 2 percent, with battered lenders Deutsche Bank and Unicredit leading the way, up some 13 percent and 11 percent, respectively.

The Nikkei added the 5.4 percent losses seen on Tuesday, closing down 2.3 percent on Wednesday as banking and commodities stocks continued to get hammered.

Major earnings on Wednesday include Cisco Systems, Pioneer Natural Resources, Tesla Motors, Twitter, Whole Foods, HubSpot and iRobot after the bell.

Oil prices bounced back, after Iran said it was open to cooperation with Saudi Arabia, partly recovering from an 8 percent fall in the previous session as global stocks sold off and supply worries remained.

The front-month Brent contract was up 53 cents, or 1.75 percent, higher at $30.85 a barrel early on Wednesday. The contract fell for a fourth straight session on Tuesday to end down some $2.56, or 7.8 percent.

U.S. crude for March delivery was 56 cents higher at $28.50 a barrel, after falling 5.9 percent on Tuesday to settle $1.75 lower.

— CNBC's Patti Domm contributed to this report.