By Eric Martin Oct. 16 (Bloomberg) -- U.S. stock-index futures advanced, indicating the Standard & Poor's 500 Index will climb after its biggest plunge since the 1987 crash, after a gauge of borrowing costs declined to a four-year low and inflation was less than forecast. Goldman Sachs Group Inc. added 3.3 percent after the overnight rate for dollar loans between banks fell 0.20 point to 1.94 percent, according to the British Bankers' Association. Banks also rose as UBS AG got a $59.2 billion government bailout. S&P 500futures expiring in December added 24.30 points, or 2.7 percent, to 927.60 at 8:50 a.m. in New York. The S&P 500 lost 90.17 points, or 9 percent, yesterday, with almost half the losses coming in the last 50 minutes of trading. Futures on the Dow Jones Industrial Average climbed 213 points, or 2.5 percent, to 8,717. Japan's Nikkei 225 Stock Average plunged 11 percent, the steepest loss in 21 years, while European markets pared their declines following the U.S. inflation report. ``We definitely need to see these borrowing costs coming down,'' said James Gaul, a Boston-based money manager at Boston Advisors LLC, which oversees $1.7 billion. ``We need to see the credit markets begin to operate normally before a sustained rally occurs in the equity markets.'' S&P 500 futures earlier fell 2.5 percent after EBay Inc. projected its first quarterly sales decline. Futures briefly pared their gain after Morgan Stanley's Stephen Roach told Bloomberg Television the U.S. faces a recession that may extend into 2010. Rally Almost Erased The retreat over the past two days erased almost all of the 12 percent gain in the S&P 500 on Oct. 13, when the market rallied the most since the 1930s on speculation the government's plan to shore up banks will ease the credit crisis. Efforts to calm financial markets probably won't result in an immediate economic rebound, Federal Reserve Chairman Ben S. Bernanke told the Economic Club of New York yesterday. The S&P 500 has lost 38 percent in 2008 as losses and writedowns from mortgage-related investments at financial firms worldwide topped $646 billion. The measure has retreated 25 percent since Sept. 26. The S&P 500 is valued at 11.1 times estimated 2008 profit for its companies. When that price-to-earnings ratio sank to 10.9 on Oct. 10, it was the cheapest compared with the multiple using trailing profit since June 1985. ``I'm pretty sure that if I go all in right now, I'll be better off in the next six months, but boy, I'll lose some sleep,'' said John Wilson, co-director of equity strategy at Memphis, Tennessee-based Morgan Keegan, which manages $120 billion. ``There's always that little nagging voice that says, `What if it's different this time?''' Borrowing Costs Fall Money-market rates in London fell after central banks provided $254 billion of emergency cash to ease the paralysis in the credit markets and Switzerland gave funds to UBS, the European bank with the biggest losses from the credit crisis. Yesterday's market decline ``is not explainable if you look at rescue packages provided by governments for banks,'' said Gerold Kuehne, who co-manages a $220 million U.S. equity fund at Liechtenstein Landesbank AG in Vaduz, Liechtenstein. ``If economic data and corporate earnings aren't much below consensus today, that could give the market a boost. A weaker oil price brings some relief on the consumption side.'' Ford Motor Co. climbed 8.7 percent to $2.50 as oil futures retreated as much as 4.5 percent to $71.21 a barrel in New York. Crude has tumbled more than 50 percent from its July record. S&P 500 futures rallied after the Labor Department said the cost of living in the U.S. was unchanged in September, restrained by plunging fuel costs and decreases in automobile prices and airline fares that signal the slowing economy is starting to cool inflation. No Gain No change in prices, less than the 0.1 percent increase anticipated by the median estimate of economists surveyed, followed a 0.1 percent drop the prior month. So-called core prices, which exclude food and energy, rose 0.1 percent, also less than forecast. EBay dropped 3.5 percent to $14.80 in Germany. The biggest Internet auctioneer reduced its annual earnings forecast as growth slows at the company's namesake Web sites. EBay forecast fourth-quarter revenue of $2.02 billion to $2.17 billion, compared with $2.18 billion a year earlier. The value of goods sold on EBay's sites fell 1 percent in the third quarter, the first drop in the company's history, as international markets declined as much as the U.S. `Obliterated' All 10 S&P 500 industries fell more than 6 percent yesterday. About $1.1 trillion in value was erased from all U.S. equities. The declines came after a drop in retail sales was almost twice economists' estimates, sending Macy's Inc. and Dillard's Inc. down more than 15 percent. The Fed's index of New York manufacturing slumped to minus-24.6, a record low. The data overshadowed a retreat in money-market rates and better-than- estimated earnings reports from JPMorgan Chase & Co., Coca-Cola Co. and Intel Corp. ``The financial sectors of the global equity market have just been obliterated, but the non-financial segments have held up relatively well,'' Roach, chairman of Morgan Stanley Asia Ltd., said during a Bloomberg Television interview. ``Earnings are still quite optimistic in terms of expectations for non- financials. The bear market, to the extent it continues, shifts from financials to non-financials.'' The economy deteriorated throughout the U.S. last month and pessimism about the outlook spread, the Fed said in its regional economic survey yesterday. Retailing, auto sales and tourism declined in ``most'' districts, while housing and construction ``weakened or remained low,'' according to the Beige Book report, published two weeks before officials meet to set interest rates. To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

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