Stocks: Decision time for the Fed and Europe

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Investors will once again look for further measures to stimulate the U.S. economy as the Federal Reserve meets this week. They'll also be watching Europe, as the German Constitutional Court hands down a ruling that could impact the European Central Bank's plans to preserve the euro.

The court is expected to issue a decision on Wednesday about the legality of the European Stability Mechanism, a permanent bailout fund that is the cornerstone of the eurozone's financial firewall. The court isn't expected to rule against the ESM, but it could attach conditions that would make it difficult for the fund to respond quickly to crises.

Conditions could also impact the bond-buying plan that ECB president Mario Drgahi outlined last week.

"This court ruling could complicate things enormously, but that's unlikely," said Brian Gendreau, market strategist with Cetera Financial Group. "Investors are likely to keep focusing on the ECB's plan as a roadmap, which it's been lacking for quite a while."

While the ruling has the potential to throw markets, investors will mostly be looking toward the Fed's two-day meeting that kicks off on Wednesday.

Going into the meeting, investors hope that the central bank will enact further stimulus measures is high. The Fed has said it "will act" if the economy merely stays the same, which a weak August jobs report last week seemed to suggest.

"The labor report was more of the same," Gendreau said. "But it's going to increase the chances that the Fed is going to announce some sort of easing."

Ben Bernanke already raised expectations for action in a speech in Jackson Hole, Wyo., last month, saying that the stagnating job market is a "grave concern" causing "enormous suffering and waste of human talent" -- one of the strongest statements yet from the Fed chairman.

Related: Jobs report likely to force Bernanke's hand

Meanwhile, several reports due this week will give investors further insight into whether the economy needs more stimulus from the Fed, including wholesale inventories, the Treasury budget, industrial production, retail sales and consumer sentiment.

In company news, Apple (AAPL) is expected to unveil details about the iPhone 5 on Wednesday and Nintendo (NTDOF) is expected to reveal the release date of its new Wii U console on Thursday. The Wii U is an upgraded touchscreen version the company's original Wii, which it released in 2006.

U.S. stock markets ended the week prior with gains. The S&P 500 and Nasdaq rose more than 2%, logging the best weekly advance since early June. The Dow Jones industrial average rose 1.6%.

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