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Dow Ends at Best Level Since 2007; FB Up 3%

Stocks closed off their best levels Tuesday, but the Dow still logged its best level in nearly five years, ahead of a key decision from the German Constitutional Court and possible action from the Federal Reserve.

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The Dow Jones Industrial Average gained 69.07 points, or 0.52 percent, to end at 13,323.36, logging its best close since December 2007, led by BofA . (Read More: Here's What's Pushing the Dow to 2007 Highs)

The blue-chip index hit an all-time high of 14,164.53 in October 2007. At current levels, the index is about 6 percent shy of that mark.

The S&P 500 added 4.48 points, or 0.31 percent, to finish at 1,433.56. The Nasdaq eked out a gain of 0.51 points, or 0.02 percent, to end at 3,104.53.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished near 16.

Most key S&P sectors ended in positive territory, led by financials and energy.

Earlier, Germany’s Constitutional Court confirmed that the ruling on the permanent European bailout fund, the European Stability Mechanism (ESM), will take place Wednesdaydespite a new court challenge. European shares closed mixedahead of the court decision.

“What the market’s telling you is that it’s expecting good news from Germany tomorrow – that the Germans are at least going to support it,” said Kenny Polcari, managing director at ICAP Equities. “And if Germany supports it, then Draghi’s plan can go forward.”

And expectations have been growing that the central bank will launch another round of quantitative easing on the heels of some recent weak economic data, most notably last week's monthly jobs report. (Read More: How to Trade the Fed's Next Likely Move)

“I’m of the minority that believes perhaps Bernanke has not been able to corral enough votes [for another round of quantitative easing], although the market is expecting it to be there,” said Art Cashin, director of floor operations at UBS Financial Services on CNBC's "Squawk on the Street." “So I wouldn’t be surprised to see perhaps just an extension [of the rate guidance] and the market will be disappointed in that.”

Energy stocks rose as oil prices climbed, with U.S. light, sweet crude trading near $97 a barrel. Alpha Natural Resources and Cabot Oil led the sectors gainers.

Also supporting stocks, China’s Premier Wen Jiabao said the nation will meet this year's 7.5-percent growth target, dismissing earlier worries over the country's worsening slowdown.

Meanwhile, ratings agency Moody's said the U.S. could lose its triple-A debt ratingif next year's budget negotiations do not produce a downward trend in the country's debt to GDP ratio, but markets largely shrugged off the warning.

Apple shares were volatile a day ahead of the tech giant's widely-anticipated iPhone 5 event. On Monday, shares briefly hit an all-time high before tumbling 2 percent. Meanwhile, JPMorgan projected that sales of the iPhone 5 could add as much as half a percentage point to the U.S. GDPin the fourth quarter.

Among other techs, Zynga announced its chief marketing officer Jeff Karp left the company on Monday, becoming the latest senior executive to leave the struggling social media gaming company.

Facebook CEO Mark Zuckerberg is scheduled to speak at the TechCrunch conference, in a rare public appearance since the social-networking giant's IPO in May. Since then, shares have plummeted nearly 50 percent amid heavy insider selling, ongoing controversy over the botched IPO and disappointing fundamentals.

Morgan Stanley and Citigroup have agreed to value their jointly-owned Morgan Stanley Smith Barney brokerage at $13.5 billion as part of a deal for Morgan Stanley to acquire all of the firm by June of 2015.

McDonald's reported a weaker-than-expected 3.7-percent gainin August same-store sales, hurt by Europe and the volatile global economy. Meanwhile, Raymond James raised its price target on the Dow stock to $95 from $92.50.

Legg Mason said CEO Mark Fetting will resign at the beginning of next month, as the money manager struggles with customer withdrawals.

Comcast edged higher after Janney Capital initiated coverage of the parent company of NBCUniversal with a "buy" and a price target of $45.

High-end retailers including Coach and Tiffany & Co slipped after luxury-goods maker Burberryissued a profit warningamid a slowdown in China and Europe's ongoing debt crisis.

On the economic front, U.S. trade deficit grew slightly in July as exports to Europe felland imports from China surged to a new record.

The government will auctioned $32 billion in 3-year notes at high yield of 0.337 percent and bid-to-cover of 3.94.

By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

Coming Up This Week:

WEDNESDAY: Weekly mortgage apps, import & export prices, wholesale trade, oil inventories, 10-yr note auction, crop outlook report, Apple iPhone 5 event, FOMC meeting begins
THURSDAY: Jobless claims, PPI, 30-yr bond auction, FOMC mtg announcement, FOMC forecasts, Bernanke press conference; Earnings from Pier 1 Imports
FRIDAY: CPI, retail sales, industrial production, consumer sentiment, business inventories, FDA decision on Truvia

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