Australian shares rallied for a second straight day as investors welcomed the first rise in US interest rates in almost a decade.

The ASX jumped 1.5 per cent on top of two per cent increase on Wednesday, raising hopes that the battered S&P/ASX200 will finish the year close to its 2014 closing level of 5,411.

“We’ve got positive momentum now,” said CMC Markets chief market strategist Michael McCarthy.

“We will build towards the top of the trading range and we’ll finish somewhere between 5,300 and 5,400.”

Inspired by a positive Wall St response to the US Federal Reserve’s decision to raise interest rates by 0.25 percentage points from near zero, the local bourse soared nearly two per cent during Thursday’s session.

Healthcare, utilities and IT stocks led the drive up, while the telcos and financials also performed strongly.

Telstra ended two per cent higher, while the big four banks also rose by a similar level.

The gains add to hopes that the market will enjoy a Santa Claus rally before investors unwrap their presents on Christmas Day.

“Markets had been on tenterhooks ahead of this Fed’s meeting and now that’s out of the way I think investors have realised that the hike’s not as bad as been feared,” said AMP Capital chief economist Shane Oliver.

“They’ve realised it’s a sign that the US ecosystem is stronger, and future hikes by the Fed will be gradual and conditional on continued improvement in the US economy.”

Dr Oliver said buyers could now pile into the discounted Australian market, which saw massive sell-offs in August and October.

“Compared to alternative investments like cash and bonds, the sharemarket is quite cheap,” he said.

He said year-end salary bonuses and a feeling of Christmas spirit coupled with the tapering off in share volumes would all help drive the buying enthusiasm.