Markets rallied Tuesday amid growing confidence that a top German court will rule favorably on Europe's bailout fund.

That confidence more than offset any concerns generated by a warning from Moody's that it may cut its credit rating for the United States, the world's largest economy.

The Moody's warning that it may downgrade its triple A score for the U.S. by one notch if progress isn't made next year on reducing the country's debt-to-GDP ratio had been widely-anticipated. Last year, the U.S. lost its top rating from the Standard & Poor's ratings agency.

Investors are more focused on Wednesday's German court ruling on a request to block the country's approval of the eurozone's permanent bailout fund, the European Stability Mechanism, or ESM. A last-minute appeal to delay the decision was dismissed Tuesday.