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Should You Short Nasdaq ETFs as Index Hits New Low for 2022?

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The Nasdaq, heavy on technology and growth stocks, retreated about 4% on Apr 26, marking its fresh low for this year, per CNBC. Rising rate worries are responsible for this slump. The index retreated further into a bear market territory, now about 23% off its high.

Tech stocks led the decline on Tuesday as investors did not wait for Microsoft and Alphabet’s first-quarter results after the bell, fearing further massacre in the markets like the one seen in Netflix earlier in the earnings season.

With Alphabet reporting weak earnings and revenues on YouTube miss, a further slide is likely in the Nasdaq-100 in the near term. Facebook parent Meta, Amazon and Apple are expected to release earnings results later this week.   

Inside Our Surprise Prediction

According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while companies with a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Apple is likely to report on Apr 28. AAPL has a Zacks Rank #3 and an Earnings ESP of negative 1.22%.

Meta Platforms is likely to report on Apr 27 after market close. FB has a Zacks Rank #3 and an Earnings ESP of +2.03%.

Amazon is likely to report on Apr 28 after market close. FB has a Zacks Rank #3 and an Earnings ESP of +22.37%.

What Lies Next?

The Nasdaq investing is likely to be edgy from here as risks and rewards are both looming on two sides. Global growth worries, including a Covid surge in China and high inflation in the United States are deterrents. High inflation is forcing the Fed to go for an aggressive rate hike cycle this year, a clear no for the Nasdaq investing (as it is primarily a growth index).

“There are a lot of economic growth concerns,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “China is a big customer for U.S. tech. ... The semiconductor industry does a lot of business there. But it’s also concerns [concerned] with growth here,” as quoted on CNBC.

But then, some big tech companies hold promise too as evident from the above-mentioned Earnings ESPs (Meta and Amazon). Microsoft came up with upbeat results this season. So, such releases should hold up the mood for Nasdaq investing. Plus, global growth worries may keep the long-term treasury yields at check despite Fed rate hikes. If it happens, the growth investing would put up a great show.  

ETFs in Focus

Against this backdrop, investors may bet on the Nasdaq ETFs like Invesco QQQ Trust (QQQ - Free Report) , Invesco NASDAQ 100 ETF (QQQM - Free Report) , Simplify Nasdaq 100 plus convexity ETF (QQC - Free Report) and Invesco ESG NASDAQ 100 ETF (QQMG - Free Report) with a long-term view.

As far as short-term investing is concerned, the scenario will remain edgy. Inverse Nasdaq ETFs like ProShares UltraPro Short QQQ (SQQQ - Free Report) , ProShares Short QQQ (PSQ - Free Report) and ProShares UltraShort QQQ (QID - Free Report) may prove to be gainful.