The Dow finished the week with solid gains Friday, edging closer to the 13000 mark which could be another indication of improvement in the U.S. economy.

The Dow advanced 45.79 points, or 0.4 percent, to 12949.87, within striking distance of 13000, a threshold last hit in May 2008. The Standard & Poor's 500-stock index rose 3.19 points, or 0.2 percent, to 1361.23, which is just short of its best close in almost four years.

Developments in Europe for the week will be closely watched by investors. Markets will be closed Monday for the Presidents' Day.

Meanwhile, investors are optimistic that European finance ministers will sign off on Greece's latest economic reform proposal when they meet Monday. Their approval is needed in order for Greece to receive bailout funds and avoid default on 14.5 billion euro bond redemption in March.

With the presidential election just round the corner, much is being made about the candidates' plans for the economy. When Barack Obama took over the White House, the Dow Jones industrial average was just below 8,000. The Dow has climbed by 62 percent since then.

Another notable aspect that indicates the economy is progressing was that the Labor Department said weekly applications for unemployment benefits dropped for the fourth time in five weeks, to the lowest point since March 2008. That was when the jobless rate was just 5.1 percent, far below the current rate of 8.3 percent.

At the same time, it is reported that consumer inflation rose in line with expectations in January. The consumer price index increased by 0.2 percent last month, versus a forecast for overall prices to rise by 0.3 percent.

All these point to the direction of a recovering economy and President Barack Obama's improving re-election prospects.