Today was yet another excellent example of the irrationality of the market as the Dow plunged a big 162 points.  Yes, there was some bad news -- oil fell another 5% and there is continuing anxiety about the deteriorating state of China's economy.  But looking at a broader perspective, investors have been anxious for quite some time about the Fed announcing a September rate hike.  Today, the likelihood of that happening decreased significantly.  The Fed, completing its two day August meeting, concluded that though there has been a lot of good news lately, unemployment and specifically underemployment continues to be unacceptably high and the inflation target has not improved at all so most of the governors went on record today that we're not ready for a hike yet.  There's also the problem that oil futures have fallen 17% since the July meeting.  Other exacerbating concerns are that China's problems may worsen and overflow into the global economy and ours.  So with the Fed today publicly stating that our near-zero rate environment will likely be with us a while longer, you'd think people would be happier.  Instead, there was this big sell off to the tune of a way over average volume of 7 billion.  Some days there is just no accounting for market logic.

Markets | Wed Aug 19, 2015 5:48pm EDT

Wall St. falls in volatile trading after Fed minutes

BY RODRIGO CAMPOS

DJ:    17,348.73  -162.61      NAS:   5,019.05  -40.30        S&P:  2,079.61  -17.31

U.S. stocks fell in choppy trading on Wednesday as minutes from the latest Federal Reserve meeting highlighted concern over the state of the global economy, driving markets to question the likelihood that the Fed will raise rates next month.

The minutes showed policymakers continued to express broad concerns about lagging inflation and the weak world economy even as the U.S. job market improved further. Market expectations for a Fed hike in September fell from one in two to roughly one in three after the minutes were published.

Utilities stocks .SPLRCU, sought by investors when Treasuries yields are seen remaining lower for longer, sharply outperformed the benchmark index with a 0.4 percent gain.

Energy stocks .SPNY posted the most losses on the S&P 500 as crude oil fell 5 percent on the day, even as the U.S. dollar also weakened.

“It looks like based on commodity prices, China, wages not really picking up, that [Fed officials] are not getting any closer to meeting their inflation target and seems like they’re probably not going to be willing to go in September" with a rate hike, said Don Ellenberger, head of multi-sector strategies at Federated Investors in Pittsburgh.

A delay in the start of the tightening cycle is seen as supportive of equities. However, concern about the strength of the global economy, specifically regarding China, kept pressure on commodity prices and weighed on stocks in the energy and materials sectors.

“Things are deteriorating in China and that’s not good for global growth. That deterioration might be enough to impact our exports and manufacturing industry,” said Ellenberger.

The Dow Jones industrial average .DJI fell 162.61 points, or 0.93 percent, to 17,348.73, theS&P 500 .SPX lost 17.31 points, or 0.83 percent, to 2,079.61 and the Nasdaq Composite.IXIC dropped 40.30 points, or 0.8 percent, to 5,019.05.

Major indexes had fallen more than 1 percent in late morning trading but the Nasdaq and Dow industrials briefly turned positive after the release of the Fed minutes.

Fed officials were concerned about "recent decreases in oil prices and the possibility of adverse spillovers from slower economic growth in China," according to the minutes.

Those concerns may have increased since. China devalued its currency nearly two weeks after the Fed meeting in a move seen by some as an attempt to energize exporters, while U.S. oil futures CLc1 have fallen roughly 17 percent since July 29, the second day of the Fed meeting.

Materials stocks .SPLRCM fell 1.2 percent as copper CMCU3 touched a six-year low on persistent concerns about slowing growth in China.

Declining issues outnumbered advancing ones on the NYSE by 2,274 to 766, for a 2.97-to-1 ratio on the downside; on the Nasdaq, 2,065 issues fell and 739 advanced for a 2.79-to-1 ratio favoring decliners.

The benchmark S&P 500 index posted 20 new 52-week highs and 28 new lows; the NasdaqComposite recorded 33 new highs and 128 new lows.

About 7 billion shares changed hands on U.S. exchanges, compared with the 6.62 billion daily average so far this month, according to BATS Global Markets data.