"It has to worry the markets that potentially you could have a president getting into a nasty dispute with the chairman of the Fed in early 2017. That's something the market would not like to see. I think the Fed has not done a very good job communicating. It's a cacophony of confusing comments. There's reason to criticize the Fed, but the personal attack on Yellen is unprecedented," said Greg Valliere, chief global strategist at Horizon Investments.
Traders are watching to see if Yellen is in the political hot seat on banking regulation and supervision when she appears before the committee.
"She has some very vocal critics in the House. She always gets a rough time during Q and A from [Rep. Jeb] Hensarling and people like that," said Valliere, chief global strategist at Horizon Investments. "I'm sure she'll get a thorough grilling."
Michael Hanson, senior economist at Bank of America Merrill Lynch, said some members of the House committee may argue that the regulations are too harsh, particularly for small banks.
Besides Yellen, Fed speakers Wednesday include Minneapolis Fed President Neel Kashkari at 8:45 a.m.; St. Louis Fed President James Bullard makes welcoming comments at a St. Louis Fed community banking conference at 10:15 a.m. EDT; and Chicago Fed President Charles Evans speaks at the same conference at 1:30 p.m. EDT. There are also appearances by Cleveland Fed president Loretta Mester at 4:35 p.m. and Kansas City Fed President Esther George, who speaks at 7:15 p.m.
"There's a lot of speakers. I don't know that there's going to be a lot of informative commentary. We're in a situation where, I think, the Fed is gradually moving toward a majority of people supporting a rate hike by the end of the year," Hanson said.
Hanson said if the data is in line and inflation looks like it is picking up, the Fed should raise rates at its December meeting, after passing on a hike last week. "It's not a done deal but it does feel, based on what we've heard from Fed officials, that they're leaning in that direction," he said.
Durable goods orders for August are expected to be down 1.4 percent, after an increase of 4.4 percent the month earlier. That number could affect GDP forecasts for the third quarter.
"There's a little bit of a sense that the rebound from the first half is not quite as good as thought. That's another reason not to rush a rate hike in September," said Hanson. He said September ISM manufacturing data should get a lot of attention when it's released next week, after it showed a surprising contraction in August.
"If we get the data weakening to the downside, and that's sustained, the Fed will probably get a little more cautious. The confidence numbers on the consumer side have been good, housing is generally good, the labor market has been OK. Some of the indicators have been less so, like the PMIs, " he said.
There are a few earnings reports Wednesday including Paychex, BlackBerry and Actuant. Nike will also get attention, after it fell more than 2 percent late Tuesday following its earnings report.
Stocks closed higher Tuesday, with the Dow up 133 at 18,228, and the S&P 500 up 13 at 2,159. West Texas Intermediate crude settled at $44.67, a decline of $1.26 per barrel.