The Dow Jones industrial average posted its best week since November on Friday, helped by optimism about merger activity and reassuring comments about inflation from Federal Reserve Chairman Ben Bernanke.

News on Friday that General Motors Corp. was in preliminary talks to buy Chrysler followed a flurry of takeover talk this week, including a report that American brewer Anheuser-Busch could be in talks with Belgium's InBev (INTB.BR).

Bernanke, in testimony this week before Congress, said that inflation is poised to ease while the U.S. economy grows moderately. Traders said his comments increased hopes that the Fed may cut rates later in the year.

For the day, the Dow eked out its third consecutive record close, ending just 2 points higher. The S&P 500 and Nasdaq were also nearly flat, with the Presidents Day holiday on Monday and expiration of February options contributing to choppy sideways trading, traders said.

"I don't think (Bernanke) talked about inflation quite as much, so that gives us (investors) the feeling we are close to the comfort level of the Fed. And we came away thinking the Fed will not need to do anything for a period of time," said Richard Sichel, chief investment officer of the Philadelphia Trust Co. in Philadelphia.

The Dow Jones industrial average rose 2.56 points, or 0.02 percent, to end at 12,767.57, a record. The Standard & Poor's 500 Index declined 1.27 points, or 0.09 percent, to finish at 1,455.54. The Nasdaq Composite Index inched down just 0.79 of a point, or 0.03 percent, to close at 2,496.31.

For the week, the Dow rose 1.5 percent, the S&P 500 gained 1.2 percent and the Nasdaq advanced 1.5 percent. It was the Dow's best week since November 19.