Stocks are at the mercy of Europe

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NEW YORK (CNNMoney) -- Europe's debt crisis has been the stock market's dark cloud for months, and investors are hoping that clear skies will finally emerge this week, as the region's leaders meet to hammer out a resolution.

Over the weekend, European Union leaders gathered in Brussels, but a plan is not expected to be unveiled until a second summit on Wednesday.

Following hours of discussion, German Chancellor Angela Merkel said progress [had] been made" over the weekend but cautioned that "it's a painful process."

"France and Germany will work hard to ensure that progress will be made," Merkel said. "There is no precedent. No expert can tell us with 100% confidence what to do."

Expectations for the EU officials to come to an agreement to solve Europe's festering debt problems are extremely high. Stocks rallied Friday at the end of a roller coaster week, with the Dow (INDU) and S&P 500 (SPX) closing at their highest levels since early August.

As long as European leaders "keep their rhetoric and don't rock the boat" leading up to Wednesday's meeting, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, stocks should stay near those levels. But nerves are fragile.

"Investors are pricing in some type of resolution soon," he said. "If that were to fall apart, we'd see a negative reaction."

EU leaders scramble to solve the crisis

While the spotlight will remain on Europe, investors will also be bombarded with another big batch of corporate earnings.

The week ahead includes reports from seven Dow components, including Caterpillar (CAT, Fortune 500), 3M (MMM, Fortune 500), and energy giants Exxon Mobil (XOM, Fortune 500) and Chevron (CVX, Fortune 500), as well as 189 S&P 500 companies, such as Netflix (NFLX), Amazon.com (AMZN, Fortune 500), Sprint Nextel (S, Fortune 500) and Visa (V, Fortune 500).

S&P 500 company earnings are expected to have climbed 15% during the third quarter, according to earnings tracker Thomson Reuters. Revenues of the companies in the benchmark index are forecast to have risen 10%.

"So far, this earnings season has been less consistent than some prior quarters, which reflects the fact that the U.S. and global economies have slowed since the middle of the year," said Peter Tuz, president at Chase Investment Counsel.

Tuz said he will be paying close attention to how companies expect to perform for the remainder of the year.

Economic news will likely take a backseat this week, said Tuz.

Investors will get updates on the housing and labor markets, with the Case Shiller 20-city home price index, new home sales, pending home sales, and initial claims data due during the week.

Reports on durable goods orders, consumer sentiment and personal income and spending are also on tap.

On Thursday, investors will get the government's first reading on third-quarter GDP. Economists surveyed by Briefing.com expect that the economy grew by 2.2% last quarter.

-- CNN International anchor Nina Dos Santos contributed to this report.