June 15 (Bloomberg) -- U.S. stocks rose on reports that showed bigger-than-forecast increases in industrial production and manufacturing in the New York area, along with a drop in consumer prices. The Standard & Poor's 500 Index headed toward a three-month high.

``The overall market is showing some good strength here,'' said Carl Birkelbach, who manages $200 million at Birkelbach Management in Chicago. ``Inflation does seem calm.''

Bear Stearns Cos., the No. 5 U.S. securities firm by market value, gained after the company reported earnings that exceeded analysts' estimates. Mylan Laboratories Inc. rose after Lehman Brothers Holdings Inc. recommended investors buy the stock.

The S&P 500 increased 2.69, or 0.2 percent, to 1206.60 as of 9:46 a.m. in New York the highest level since March 14. The Dow Jones Industrial Average futures gained 28.85, or 0.3 percent, to 10,576.42. The Nasdaq Composite Index added 5.59, or 0.3 percent, to 2074.63.

Almost 11 stocks advanced for every six that declined on the New York Stock Exchange. Some 69 million shares changed hands on the Big Board, 11 percent more than the same time a week ago.

Consumer Prices

Prices paid by U.S. consumers for goods and services declined for the first time since July, restrained by cheaper energy, suggesting inflation is contained.

The consumer price index fell 0.1 percent in May after rising 0.5 percent in April, the Labor Department said. Core prices, not subject to larger fluctuations because they exclude food and energy, rose 0.1 percent. Economists forecast no change in consumer prices and a 0.2 percent gain in the core rate, according to a Bloomberg News survey.

To tame inflation, the Federal Reserve has lifted its overnight lending rate by a quarter point at each of its last eight meetings to 3 percent. It also maintained a pledge to make future increases at a ``measured'' pace.

Industrial production rose 0.4 percent in May, the Fed said. The increase in production at the nation's factories, mines and utilities last month follows a revised 0.3 percent decrease in April that was deeper than first estimated. Economists expected a gain of 0.2 percent, according to a Bloomberg survey.

New York state manufacturing rebounded more than economists expected in June. The Federal Reserve Bank of New York's index rose to 11.7 from minus 11.1 in May. Economists expected a rise to 1.0, according to a Bloomberg survey. Readings greater than zero represent expansion.

Bear Stearns

Bear Stearns gained $1.13 to $101.46. The company reported second-quarter profit of $2.56 a share, more than the $2.37 analysts expected in a Thomson Financial survey.

Mylan rose 20 cents to $19.78. The company's nebivolol blood-pressure drug should help increase earnings, Lehman analyst Richard Silver wrote in a report. He boosted the stock's rating to ``overweight'' from ``equal weight.'' Yesterday, Mylan said it's seeking a licensing deal for nebivolol.

Napster Inc. rallied 20 cents, or 4.6 percent, to $4.53. The company agreed to start an online music service in the coming 12 months with Ericsson AB, the world's largest maker of cellular-phone networks, to compete against Apple Computer Inc. and Motorola Inc.

Illinois Tool Works Inc., the maker of Duo-Fast nail guns and Hobart welding gear, slid $1.36 to $81.05. The company reduced its second-quarter and annual-profit forecasts because of slowing demand.

U.S. shares of Royal Philips Electronics NV dropped $1.13 to $25.96. Europe's biggest maker of televisions and coffee machines said consumer demand in the region is lower this quarter. Chief Executive Gerard Kleisterlee said Europe ``is suffering from a weakened consumer retail environment,'' in a statement before an analyst meeting in Amsterdam.

To contact the reporter on this story:
Ari Levy in New York at  alevy5@bloomberg.net.