The iShares MSCI Emerging Markets ETF (EEM) gained 1 percent on Wednesday to close above its 200-day moving average for the first time since June 2015.
"The market is overinterpreting this as, we're going to see one hike this year or no hikes this year," said Brian Nick, head of tactical asset allocation at UBS Wealth Management Americas.
"The balance of the year is going to be sink or swim depending how earnings come in," he said.
Read MoreGet ready for a rough corporate earnings season
Early Wednesday, Chicago Fed President Charles Evans said on CNBC's "Squawk Box" "the threshold for having confidence that inflation will sustainably move up to our 2 percent inflation target, is pretty high, that hurdle is pretty high. I'd be surprised if we met that condition myself in April."
Later, speaking to the Forecasters Club of New York, Evans said in a Reuters report that a "very shallow" series of interest rate hikes over the next few years is appropriate to buffer the U.S. economy from outside shocks and the risk of inflation slipping too low. He raised his inflation forecast for this year to 1.6 percent — though he still expects it to take up to three years to hit the Fed's 2-percent target, Reuters said.
Evans, an alternate member of the Federal Open Market Committee, also said a slow succession of U.S. rate hikes is warranted given the early-year bout of market volatility and the likelihood that such episodes will be more frequent, according to Reuters.
Read MorePro Uncut: Full interview with Fed's Charles Evans
The U.S. dollar index held off session lows with a decline of 0.35 percent, still its third-straight day of declines. The euro hit a high of $1.1364 against the dollar, its highest since Feb. 11. The yen was near 112.41 yen against the greenback. The dollar index is on pace for a quarterly decline of nearly 4 percent.
U.S. crude oil futures settled up 4 cents, or 0.1 percent at $38.32 a barrel. WTI spiked more than 3.5 percent after weekly inventories showed a build of 2.3 million barrels.
"People still couple oil with global growth potential," said Kevin Mahn, president and chief investment officer at Hennion & Walsh Asset Management. "I don't think that's fair."
The 2-year Treasury yield hit its lowest since February at 0.757 percent. The 10-year yield held higher around 1.83 percent.
"I think it's a bit of a hangover from Yellen's speech yesterday afternoon, which of course appeared to cap the number of rate hikes for 2016 at two," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.
In an address to The Economic Club of New York, Yellen said Tuesday that economic readings are mixed and it is appropriate to proceed cautiously in adjusting policy.
"The future path of the federal funds rate is necessarily uncertain because economic activity and inflation will likely evolve in unexpected ways," she said, noting risks to the economic outlook from global developments, particularly continued uncertainty around China's transition.
Read MoreYellen push back at hawks creates confusion
Ahead of Friday's employment report, ADP said 200,000 positions were added in March.
"The ADP report probably speaks to a decent non-farm payrolls report on Friday," Pavlik said.
Apple closed up 1.75 percent, off session highs but extending Tuesday's rally.
Cowen upgraded the stock on Wednesday to "outperform" from "market perform" and raised the price target to $135, based on expectations that year-over-year comparable sales and forward estimates have bottomed. Cowen also noted likely upside from the coming upgrade cycle, potential use of OLED technology and valuation.
Separately, the iPhone maker is partnering with Major League Baseball to help with analytics by providing all teams with the iPad Pro and a specialized app.
Information technology, consumer discretionary and financials led advancers in the S&P 500, while health care ended a touch lower as one of the few decliners.
MetLife rose 5.35 percent, AIG gained 2.12 percent, and Prudential Financial advanced 2 percent to lead financials. A U.S. district judge struck down on Wednesday the designation made by the heads of the country's financial regulatory agencies that major insurer MetLife is systemically important to the U.S. financial system, Reuters said.