Tesla's market fortunes are turning round – with Elon Musk's company on track for its best month since 2020 after last year's dismal run

• Tesla's share price has jumped 44% in January, putting it on track for its best month since November 2020.
• That has pared back more than two-thirds of the electric carmaker's losses from last year's 64% plunge.

Tesla's stock price is on track for its best month in over two years, representing a dramatic change in the market fortunes of the electric carmaker after a hellish 2022 in which it suffered a $700 billion wipeout.

Shares have climbed over 44% so far in January, trading at $177.90 as of Friday's closing bell – and the stock will have enjoyed its best month since November 2020 if it holds those gains over the next two days, according to Refinitiv.

Rising interest rates and CEO Elon Musk's chaotic Twitter takeover weighed on Tesla last year, with shares plunging 64%.

But the stock has climbed over the past month thanks to an improvement in broad investor sentiment and a better-than-expected fourth quarter earnings report from the automaker.

Tesla's rebound has coincided with rallies for benchmark indices, with the S&P 500 up 6% and the tech-heavy Nasdaq Composite climbing 11% year-to-date.

That's because investors are starting to anticipate that the Federal Reserve will cut interest rates at some point in 2023.

The central bank hiked the cost of borrowing from near-zero to 4.5% over the past year in a bid to crush soaring inflation, which weighed on stocks by lowering the future cash flows that make up part of their valuations.

The majority of traders now expect the Fed to have started slashing rates by the end of the year, according to CME Group's Fedwatch tool – which could support stocks and stop the US economy slipping into a recession.

Tesla was also boosted by a strong fourth-quarter earnings report.

The EV manufacturer logged earnings-per-share of $1.19 for the three months ending December 31, which comfortably beat Wall Street analysts' expectations.

Tesla's revenue also grew 37% year-on-year to $24.3 billion, which narrowly beat analysts' $24.1 billion target and could show shareholders that recent aggressive price cuts have helped to revive faltering demand.

The company has also benefited from China lifting its harsh zero-COVID lockdown policies, which has allowed it to ramp up production in its factories there.

"Following last year's horrendous valuation pressures, Tesla investors are craving clarity and stability and this quarter has offered a dose of both," Hargreaves Lansdown analyst Sophie Lund-Yates said Wednesday after Tesla's fourth-quarter earnings.

"The reopening of China has unlocked the full potential of Tesla's economies-of-scale once more, meaning production in the region is largely back in full swing," she added. "The share price rally since the start of the year has been largely linked to this, and progress hasn't been dented thanks to Tesla's record quarter."

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