With its quarter-percentage point cut Wednesday in the fed funds rate to 4.50% and the discount rate to 5.00%, the Fed appeared to tilt slightly against another interest rate cut in December.

In its statement, the Fed said "economic growth was solid in the third quarter" and that strains on financial markets had eased somewhat on balance. The Fed added that today's action "combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy."

Fed Analysis: The above suggests that Chairman Ben Bernanke and the Fed are laying the groundwork for an end to the Fed's brief easing of monetary policy, if in fact the U.S. economy grows at an acceptable rate or inflation accelerates. The economy has slowed through 2007, but on Tuesday Q3 GDP unexpectedly accelerated to 3.9%, the U.S. Commerce Department announced, up from 3.8% in Q2. It's quite likely Tuesday's Q3 GDP statistic influenced the Fed -- swiping away any notion of a half-percentage-point, or 50 basis point, reduction in short-term rates. Further, while monetary policy doves will argue that the sub-prime mortgage and sluggish housing sector headwinds remain, monetary policy hawks -- or those who believe the Fed does not need to cut rates further -- can argue that the Fed has two GDP data points, Q2 and Q3, which indicate that the U.S. economy is growing at a sufficient rate, and that the Fed can now keep interest rates where they are, absent new evidence of a slowing economy, in the quarters ahead.

Managing Director Bill Gross, who manages the world's biggest bond fund for Pacific Investment Management Company, wrote in a report published on the firm's web site, that he expects the U.S. Federal Reserve to lower key interest rates to 3.50% to avoid a U.S. recession.

Wall Street may interpret lower interest rates as good news for stocks, long-term, but that will not be the case with the U.S. dollar. Along with the current account, and investment performance in a particular country, a major factor in a currency's strength is the interest paid on deposits. Generally, currencies with high interest rates are valued higher than currencies with low interest rates, all other factors being equal.

Countrywide (NYSE:CFC), a U.S. home mortgage lender, is down .92 to $19.18. According to Dow Jones Source; From CFC's Chairman of the Board Angelo R Mozilo sold 139,918 shares at $20.14 for a value of $2,818,368 on 10/8/07 after exercising 139,918 shares for $9.94 for value of $1,390,785 on 10/8/07. CFC November option implied volatility of 68 is above its 26-week average of 59 according to Track Data, suggesting larger risk.

US Airways (NYSE: LCC) is recently up .95 to $31.52. Goldman Sachs upgraded LCC to Buy from Neutral and raised its price target to $36 from $33. LCC over all option implied volatility of 57 is above its 26-week average of 52 according to Track Data, suggesting slightly larger risks.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

The New York Times reports that another European bank hedge fund has been wiped out due to its investment in subprime mortgage backed securities (SMBS). Netherlands' NIBC Holdings reported that it lost at least $188 million on investments in the American mortgage market for subprime loans. It joins Paris' BNP and Düsseldorf, IKB Deutsche Industriebank, and some Australian hedge funds and banks.

With the globalization of financial markets, it's clear that nobody knows which banks, hedge funds, insurance companies, and pension funds own those SMBSs. Nor do they know how much money banks have lent these institutional investors. But if the banks decide they want their money back, and the collateral is worthless, then the institutional investors will either need to sell more liquid holdings -- e.g., stocks -- or they will file for bankruptcy.

In a rather lame move, the Wall Street Journal reports that in an effort to see if they're hiding losses, the SEC is examining the books of U.S. investment banks to see if they're marking down the value of their own subprime portfolios in the same way as they are marking down those of their clients. But what's really needed, as I suggested above, is a view of the global damage -- not just the situation in the U.S.

Home Depot (NYSE: HD) hoped it had sold its HD Supply business to private equity interests for $10.325 billion. Problems in the credit market trashed the deal.

HD announced that it is now in "discussions with affiliates of Bain Capital Partners, The Carlyle Group and Clayton, Dubilier & Rice for the purpose of restructuring the previously announced agreement for the sale of HD Supply."

That means that the buyers want a better price because they cannot raise the cake to make the purchase. Obviously, no sane bank or investment firm wants to make a high-risk loan for a high-leverage deal. Not with most of them holding the bags on other deals that they could not syndicate to institutional investors.

Market conditions are also causing the retailer to drop the price at which it will buy its shares in its previously announced "Dutch auction" tender offer to purchase up to 250 million shares of its common stock at a price between $39 and $44. Market conditions have caused the company to drop the price range to between $37 and $42 per share.

If the market needed a sign that the credit markets are on the critical list, this is it. One of America's largest companies lowering the price of a buyback and three premiere private equity firms unable to raise capital for a previously announced deal. Imagine how bad things are getting for less marquee deals.

Home Depot shares are down almost 6% in the pre-market.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Jim Rogers is pretty much the man, and anyone who followed the advice in his book Hot Commodities has already made a bunch of money. But his latest comments on state of the financial world are not so encouraging.

Rogers said the fallout from the subprime mess has "got a long way to go'' in an interview with Bloomberg News. According to the piece:

"This was one of the biggest bubbles we've ever had in credit,'' Rogers, chairman of New York-based Beeland Interests Inc., said in an interview from Hong Kong. "I have been and am still short the investment bankers in America. I'm also short homebuilders.''

Uh oh. Jim Rogers is one of a handful of experts who really is worth listening to when he opines on macroeconomic issues, even if you don't like what he has to say.

The business world is anxiously waiting to hear what Ben Bernanke has to say, but Rogers' wisdom may be even more important for individual investors to heed.

Also on CNBC this morning, Jim Rogers said he did not support a Fed bailout of the stock market and said that while Bernanke is "not very smart," he hopes he won't make that mistake.

Ben Bernanke told us in May that the impact of subprime mortgages collapsing would be contained. But The Financial Times begs to differ. FT reports that leading bankers are trying to calm the global markets even as they admit that the shockwaves from the U.S. subprime collapse could put private equity deals on hold for the next few months.

Is Ben Bernanke wrong? How could a former Princeton economist not understand that problems in one category of loans might make banks nervous about other loan categories? Or is it simply that Bernanke took his job as economic cheerleader in chief a little too seriously?

One banker thinks it could be three months before subprime's damage takes its foot off the brakes of private equity. Bob Diamond, Barclays president, predicted the consequences of the subprime collapse could take more than a year to be resolved. However, he said the leveraged loan market should recover more quickly: "We would expect at some point over the next two to three months to see that market at more normal volume levels."

Maybe Diamond is right and Bernanke is righter. But is it possible that their predictions are just wishful thinking? I don't know. What do you think?

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.