May 16 (Bloomberg) -- U.S. stocks rose as oil prices held below $49 a barrel and a weaker-than-expected report on manufacturing in the New York area eased concern the Federal Reserve will step up the pace of interest-rate increases.

Bank shares such as Citigroup Inc. led the gains. Retailers climbed after Lowe's Cos., the world's No. 2 home-improvement chain, reiterated its annual profit forecast.

``The picture for the market is generally pretty bright,'' said Edwin Miska, who manages about $1 billion for First Investors Management Co. in New York. ``If oil can settle in at a lower level in the $40s as opposed to the $50s, that's almost like a rebate to consumers and to businesses.''

The Standard & Poor's 500 Index rose 10.19 or 0.9 percent, to 1164.24 as of 3:20 p.m. in New York. The Dow Jones Industrial Average gained 103.60, or 1 percent, to 10,243.72. The Nasdaq Composite Index added 15.13, or 0.8 percent, to 1991.91 and is on pace for its highest close since April 12.

About 14 stocks advanced for every five that declined on the New York Stock Exchange. Some 1.2 billion shares changed hands on the Big Board, 6.4 percent more than the same time a week ago.

Crude oil for June delivery lost 6 cents to $48.61, after earlier touching $47.60, the lowest since Feb. 18. Oil extended last week's 4.5 percent slide after the secretary general of OPEC said the organization could boost production capacity by the end of this year.

`Valuations Attractive'

``If we can keep oil prices down, we have a possibility of having a 10 percent'' return in stocks over the next year, said Jeremy Siegel, finance professor at University of Pennsylvania's Wharton School. ``Valuations are very attractive now.''

The S&P 500 is down 4 percent this year, even as two-thirds of the 460 companies in the benchmark that have reported first- quarter earnings have beaten analysts' estimates, according to a Bloomberg analysis of Thomson Financial data.

A Fed gauge of New York state manufacturing in May unexpectedly contracted after two years of growth. The index, which gives a clue to the current performance of U.S. industry, dropped to minus 11.1 from 2.0 in April. Economists expected an increase to 11.7, according to a Bloomberg News survey.

An index of financial companies rallied 1.6 percent, the biggest gain among 10 industry groups in the S&P 500. Citigroup, the world's No. 1 financial-services company, increased 87 cents to $46.78. Bank of America Corp., the third-largest U.S. bank, jumped 65 cents to $45.78.

A Fed Pause?

``The market needs to see that inflation pressures have abated sufficiently,'' said Bruce Bittles, chief investment strategist at Robert W. Baird & Co. in Nashville, Tennessee. ``If we continue to get some weaker economic numbers and commodity prices continue to slump, the Fed will react to that I think by at least pausing in their efforts.''

Reports on producer and consumer prices due later this week may give investors more clues as to whether inflation is under control. Producer prices likely rose 0.4 percent in April, according to the median estimate of economists surveyed by Bloomberg. That follows a 0.7 percent gain in March. Consumer prices climbed 0.4 percent in April after rising 0.6 percent a month earlier, a May 18 report may show.

The Fed earlier this month lifted its overnight bank-lending rate a quarter-point to 3 percent, its eighth straight increase since June, and restated its commitment to continue rate hikes at a ``measured'' pace.

Retailers Advance

Lowe's jumped $2.52 to $55.38. The company reiterated its annual forecast for as much as $3.34 a share even as first- quarter sales missed the company's forecast because cold weather in March reduced customer traffic.

Larger rival Home Depot Inc., which will report first- quarter earnings tomorrow, added 97 cents, or 2.7 percent, to $37.26 for the largest gain in the Dow average. A gauge of retailers advanced 1.7 percent for the second-biggest rally among 24 industry groups in the S&P 500.

Nursing-home operators climbed after a U.S. agency proposed new reimbursement rules that avoid a $1.5 billion cut sought by the White House. Manor Care Inc., which owns and operates long- term care centers in the U.S., rose $3.63, or 11 percent, to $36.93 for the biggest gain in the S&P 500. Smaller competitor Kindred Healthcare Inc. advanced $2.73 to $38.56.

Celgene Corp., a biotechnology company whose shares are up 50 percent this year, increased $2.80 to $39.80 after it said its Revlimid treatment for a type of blood cancer delayed the progression of the disease in two trials.

Overnite Corp. surged $12.79, or 43 percent, to $42.37 after United Parcel Service Inc., the world's largest package-delivery company, agreed to buy the trucking company for $1.25 billion. UPS said it will pay $43.25 for each share of Overnite, a 46 percent premium over the closing price May 13. UPS added $1.05 to $73.20.

Energy Shares

A measure of energy shares had the biggest decline among 10 S&P 500 industry groups, sinking 1.3 percent. Exxon Mobil Corp., the world's largest publicly traded oil company, slid 62 cents to $53.08.

Dow Chemical Co. lost $1.46 to $43.61. The largest U.S. chemical maker was cut to ``neutral'' from ``overweight'' by JPMorgan Chase & Co. analyst Jeffrey Zekauskas. He cited concern about the company's ``commodity-oriented business'' as profit margins shrink on products such as ethylene and propylene.

The Reuters-CRB Index of 17 commodities fell 0.4 percent to 292.62, extending last week's 2.2 percent retreat, on concern that demand is waning. The gauge has slumped 9.2 percent since reaching a 24-year high on March 16.

To contact the reporter on this story: Dune Lawrence in New York at dlawrence6@bloomberg.net.

Last Updated: May 16, 2005 15:23 EDT