The Dow notched its 40th record close of the year on Monday with the broader stock market gaining as investors piled into financials and materials shares.

The Dow Jones Industrial Average DJIA, -0.87% rose 63.01 points, or 0.3%, to finish at 22,331.35, led by sharp gains for industrials giants Caterpillar Inc. CAT, -0.96% and General Electric Co. GE, -2.41% . Monday marks the Dow’s fifth record close in a row and its seven straight day of gains.

The S&P 500 index SPX, -1.11% also ended at a record, adding 3.64 points, or 0.2%, to 2,503.87 as financials rallied 1%.

The technology heavy Nasdaq Composite Index COMP, -1.07% added 6.17 points, or 0.1%, to close at 6,454.64.

Stocks ended off their intraday highs as technology and biotech shares came under pressure but Sahak Manuelian, managing director of equity trading at Wedbush Securities, believes the path of “least resistance is to the upside at the moment.”

Some market participants saw healthy data domestically and abroad as the key impetus for the re-emergence of equity buying.

“The economic data continue to support the fact that the world economy is doing better,” said Maris Ogg, president at Tower Bridge Advisors. “And we have received confirmation from a lot of angles that Europe is finally in recovery,” she said.

“All leading indicators are rising and confidence is rising,” Ogg said. She said Europe represents about 30% of world GDP on a purchase-power parity basis, adding that “could very well keep the rest of us moving forward.”

Check out MarketWatch’s Need to Know column:When the stock market finally implodes, don’t say these 3 charts didn’t warn you

Worries about tensions between North Korea and the U.S. continued to take recede.

U.S. Secretary of State Rex Tillerson, during an interview on CBS’s ”Face the Nation,” said the U.S. seeks a “peaceful solution” and wants to “bring North Korea to the table for constructive, productive dialogue.”

But in a separate interview, White House national security adviser H.R. McMaster said “all options remain on the table,” with regards to pushing Pyongyang to denuclearize.

In other global markets, it has largely been a sea of green. In Asia, South Korea’s Kospi 180721, -0.57% logged its biggest gain since May, while Hong Kong’s Hang Seng Index HSI, -1.23% rose 1.3%.

Fed in the spotlight: A highlight for this week will be the Federal Open Market Committee’s two-day meeting, which wraps up Wednesday.

No policy change is expected but it could mark the beginning of a new era as the Fed is expected to announce details on the unwinding of its $4.5 trillion balance sheet, according to Bill Stone, global chief investment strategist at PNC Asset Management Group.

Read:Fed to take historic leap into the unknown

And:How much longer this stock-market bull run lasts may depend on the Fed’s next move

Meanwhile, the National Association of Home Builders’ index for September showed that builder confidence in the market for newly built single-family homes dropped during the month on worries that the recent hurricanes will make it difficult to find workers and materials.

The NAHB/Wells Fargo housing-market index fell 3 points to 64, and August’s reading was cut by a point to 67.

Stocks to watch: Shares of Orbital ATK Inc. US:OA jumped 20% after Northrop Grumman Corp. NOC, -0.68% announced a deal to buy its rival defense contractor for $7.8 billion in cash. Shares of Northrop Grumman were up 3.4%.

Silver Spring Networks US:SSNI is up 24% after Itron Inc. ITRI, -0.86% says it would buy the Internet-of-things company for $830 million. The deal represents a 25% premium to shares of Silver Spring from Friday’s close. Shares of Itron were up 5.1%.

Nabriva Therapeutics PLC NBRV, -0.51% is up more than 29% on a positive trial for a pneumonia treatment.

Other markets: European stocks SXXP, -0.66% posted gains across the board ahead of the German election.

Read:Who’s Merkel up against and what are their chances?

Crude-oil US:CLZ7 prices struggled to make a decisive move, while gold futures US:GCZ7 settled down at a 3-week low. The U.S. dollar shot up to an eight week-high against the Japanese yen.

A brief history of retail banking

—Barbara Kollmeyer contributed to this article.