No, the stock market problem isn't the interest rates, it's that lending institutions went around giving massive loans to people who had no business being loaned a nickel.
"You make $200,000 a year working as a taco-stand meat-fryer, Mr. Sanchez? Ah, and I see you have your Matricula Consular card, so clearly that must be your real name and you can legally live and work here. Ok, you're qualified for a $1,000,000 mortgage loan at 6.25% interest! Sign here, and enjoy your new home in Malibu."
Of course, it's not just Dirty Sanchez, it's also Susie the Manicurist who just bought a shack that was badly hacked together on land out in the middle of nowhere because she was afraid she wouldn't be able to afford it if she didn't buy it now, so she paid $200,000 for a dump that is worth maybe $120,000. And her income couldn't pay for a $120K mortgage, much less a $200K no-money-down mortgage, so she's screwed, the bank is screwed, and the investors are screwed.
Now, those loans aren't being repaid, financial institutions worldwide are taking major hits, nobody is quite sure just how bad it's going to get, and even though it's already bad IT'S GOING TO KEEP GETTING WORSE.
The Fed could cut rates, but only at the risk of causing the U.S. Dollar to slip against other currencies in countries whose central banks already have higher rates (encouraging foreign investment there). Of course, even if they don't cut rates, the dollar will slip because nobody is going to want to buy dollars so that they can finance crappy home loans any more.