A big gain in shares of HP (NYSE: HPQ) led tech stocks higher on Tuesday, but stock indexes pared their gains following a downbeat assessment of the economy by the Federal Reserve.

HP shares gained 8% to lead a strong tech sector, a move attributed to optimism that technology companies are well positioned to weather the economic downturn because of their high cash levels. HP had more than $10 billion on its balance sheet as of the end of October.

Others with gains of 4% or more included Research in Motion (NASDAQ: RIMM), Amazon (NASDAQ: AMZN), Dell (NASDAQ: DELL), Cisco (NASDAQ: CSCO), Applied Materials (NASDAQ: AMAT), Sun (NASDAQ: JAVA), Marvell (NASDAQ: MRVL), Broadcom (NASDAQ: BRCM), Seagate (NYSE: STX), Electronic Arts (NASDAQ: ERTS) and Flextronics (NASDAQ: FLEX), far outpacing the Nasdaq's 1.5% gain.

Micron (NYSE: MU), Rambus (NASDAQ: RMBS) and SanDisk (NASDAQ: SNDK) surged 4.5% or more on higher memory prices.

Emulex (NYSE: ELX) gained 5.6% despite lowering revenue guidance, while Logitech (NASDAQ: LOGI) slumped 6% on its outlook.

Garmin (NASDAQ: GRMN) lost 4% on a Goldman Sachs downgrade.

The indexes finished well off their best levels after Federal Reserve meeting minutes showed that the Fed expects a significant economic contraction in the first half of the year, and rising unemployment into 2010. But optimism that the incoming Obama Administration can pass a substantial economic stimulus package helped temper selling.

The Nasdaq rose 24 to 1652, the S&P 500 gained 7 to 934, and the Dow rose 62 to 9015. Volume rose to 6.1 billion shares on the NYSE, and 2.18 billion on the Nasdaq. Advancers led by a 29-8 margin on the NYSE, and 20-8 on the Nasdaq. Upside volume was 76% on the NYSE, and 80% on the Nasdaq. New highs-new lows were 27-78 on the NYSE, and 13-16 on the Nasdaq.

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