Small Caps VIRC and DRYS

Stocks are flying high Friday afternoon buoyed by better-than-expected earnings releases out this week from benchmark companies and financial institutions.

At 1:58 pm ET, the Russell 2000 (NYSE:IWM) is up 1.46% or 480.80, while the Dow is up 0.56% and the S&P 500 is climbing 0.92%.

After announcing a quarterly cash dividend along with fourth-quarter results, small-cap Virco Manufacturing Corp. (Nasdaq:VIRC) is up a stunning 60%, while DryShips (Nasdaq:DRYS) is 25% higher after being upgraded to “outperform” by Oppenheimer. (DRYS was one of the three promising shipping stocks we included in our recent special report on dry bulk shippers. You can click here for a copy of the report.)

******Stocks have marched steadily higher since March 9. The first 10 days or so of the rally was a mad dash, which is how recovery rallies behave. But since the huge up day on March 23, stocks have settled higher. The S&P is now within spitting distance of its 2009 highs.

There’s no doubt that investors have been pricing in some fairly optimistic expectations. And so far this earnings season is rewarding that optimism.

Now, I’m not saying that earnings have been great. The point is, earnings haven’t been terrible. Or at least, not as terrible as investors thought they’d be back in February.

You may recall that many analysts were saying first-quarter earnings would be when we’d really see just how bad the economy has been. It’s still early in earnings season, but we’ve heard from some important companies. I think it’s safe to say that earnings could have been much worse.  

*****Take General Electric (NYSE:GE), for example. GE stock price is down 63% form its 52-week highs. It cut its dividend and lost its AAA debt rating. That’s . . .

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