This story was updated at 4:41 p.m. EST.

U.S. stocks closed down Thursday after the Fed raised its target federal funds interest rate for the first time in years and indicated that future hikes would be implemented cautiously. The news, which had been expected for weeks, paved the way for investors to kick off their traditional year-end Santa Claus Rally, when stock prices surge in the final weeks of the year.

“The good news is we had this massive uncertainty move out of the way without any damage to the markets,” said Adam Sarhan, founder and chief executive officer of investment firm Sarhan Capital. “Stocks are rallying because even though the Fed raised the rate, they’re still maintained a dovish stance. Historically speaking, a 0.25 percent rate is an extremely unprecedented low.”

Historical trends suggest stocks should edge higher in the waning weeks of the year. Both the S&P 500 index of the largest U.S. companies and the Dow Jones Industrial Average have gained more over the past month than they have since the start of the year.

The Fed’s rate hike increases the cost of borrowing, from corporate loans to credit card balances. Higher borrowing rates eat into corporate profits, generally pushing down stocks. But the federal-funds rate that was moved Wednesday to range between 0.25 percent and 0.50 percent is still lower that it’s been since May 1958, excluding the past seven years, according to Fed data.

After gaining 1.28 percent on Wednesday, the Dow (INDEXDJX:.DJI) closed 253.25 points, or 1.43 percent, lower to 17,630. The Standard & Poor's 500 index (INDEXSP:.INX) dropped 31.18 points, or 1.50 percent, to 2,042. The Nasdaq composite (INDEXNASDAQ:.IXIC) fell 68.58 points, or 1.35  percent, to 5,003..

Nine out of 10 S&P 500 sectors declined on Thursday with only utilities stocks making a slight gain. UnitedHealth Group Inc. (NYSE:UNH) was leading Dow gains, as Obamacare enrollment was extended on high demand, pushing up health-insurance stocks. Heavy machine manufacturer Caterpillar Inc. (NYSE:CAT) led declines on lingering concern over a global economic slowdown, which pulls down demand for construction equipment.

Oil Prices

U.S. crude prices closed down Thursday, a day after the U.S. announced a record increase in crude inventories that helped drive down U.S. and global prices by low single digits Wednesday.

West Texas Intermediate crude oil, the U.S. benchmark for oil prices, shed 2.22 percent to $34.73 per barrel for January delivery on the New York Mercantile Exchange. Brent crude, the global benchmark for oil prices, moved in the other direction, lost 1.44 percent to $36.85 for February delivery on the London ICE Futures Exchange.

Global Markets

European shares closed up in response to the interest rate hike, led by the German DAX, which rose 281.35 points, or 2.69 percent, to 10,751, in afternoon trading. The Paris CAC 40 rose 60.16 points or 1.30 percent to 4,685. London’s FTSE gained 53.67 points or 0.89 percent to reach 6,115.

Asian stocks rallies Thursday on their first session after the rate hike announcement. Hong Kong’s Hang Seng gained 170.85 points, or 0.79 percent, to 21,872. Japan’s Nikkei jumped 303.65 points, or 1.59 percent, to 19,354. China’s mainland Shanghai Composite Index rose 63.81 points, or 1.81 percent, to 3,580.

In related news, Taiwan unexpectedly cut its interest rate by 12.5 basis points to 1.625 percent, a signal of Asia’s continued slowdown.

“The [Taiwanese] central bank painted a fairly gloomy picture of the economy in today’s statement, noting that weaker-than-expected global demand and a slowdown in the domestic economy had started to impact on the labor market,” Gareth Leather, senior Asia economist for Capital Economics, said in a note on Thursday.