As Michael has pointed out you should never modify the stack pointer in a 'C' program. If you were setting it to 0x40 in your LCD code (or any largish program) this would probably be the cause of your troubles. In the exact code you have posted, however, I can't see that it would have made any difference.

I notice from your comments that you have LEDs connected to port 1. I don't know what you expect to see on those LEDs when you run this program but if you are expecting to be able to see flickering, or some such, you will be disappointed. They will appear to remain at a constant brightness which may or may not be distinguishable by eye from the brightness they show when the processor is held in reset, depending on how you have them connected.

Your best bet would be to take a look at the example programs provided with the compiler.

It's a pity you are having so much difficulty getting going with Keil, their tools are excellent (not perfect, but is anything?) and, at the expense of sticking my neck out here, probably the best available for the 8051.