The U.S. government is in the ninth day of a partial shutdown and just over a week before U.S. borrowing authority lapses Oct. 17.
Obama nominated Yellen, the current Fed vice chairman and an architect of its stimulus program, to succeed Ben Bernanke as chairman. As a top deputy to Bernanke, whose term expires Jan. 31, Yellen supported the central bank's bond-buying programs that have helped propel the S&P 500 up as much as 155 percent from a 12-year low in March 2009.
"The market breathes a sigh of relief with Yellen's appointment," Chris Gaffney, senior market strategist at Everbank Wealth Management, said in an interview from St. Louis. "The markets like the fact that Yellen is a known quantity. She has supported the stimulus program, in fact she's largely thought to be the architect."
Most Fed policy makers said the central bank was likely to reduce the pace of its bond purchases this year, according to minutes released Wednesday of their last meeting, which took place before the government shutdown.
At the Sept. 17-18 gathering, officials unexpectedly maintained the pace of its monthly purchases. That decision pushed the S&P 500 to a record close of 1,725.52. The gauge retreated 4.1 percent through yesterday since then.
"If you read the minutes with blinders on what's going on in Washington, you might think the next meeting in October is on the table for tapering to start, but obviously given what we're dealing with the debt ceiling, that likelihood is extremely thin," Liz Ann Sonders, New York-based chief investment strategist at Charles Schwab, said in a phone interview. Her firm has $2.08 trillion in client assets.
The government shutdown has delayed the release of economic data, including the Labor Department's monthly payrolls report, which was due Oct. 4. The lack of data is making it harder for Fed policy makers to assess the health of the economy as they consider when to start paring unprecedented monetary stimulus. Central bankers next convene Oct. 29-30.