With J.C. Penney Company, Inc. (NYSE:JCP) up 5 percent last week, has the department store turned a corner?

J.C. Penney Company JCP

J.C. Penney up 5 percent in one week

While J.C. Penney Company, Inc. (NYSE:JCP) is still down over 1 percent on the year, the retail sector may experience a headwind from consumer confidence and the weather, according to a Sterne Agee report.

Sterne Agee notes consumer confidence, weather

Consumer confidence has been rebounding strongly since January 2009, and the latest readings fit right in with that trend, with the latest reading at 83.0, up from 81.7 in April. The average reading has been 84.5 since January 2000 with a high of 144.7 (May 2000). Notably, as you can see from the chart below, May’s reading was the second highest since early 2008, prior to the index’s collapse associated with the mortgage backed derivatives implosion.  The report also noted that weather in the Midwest following Memorial Day will continue ideal for shopping, while weather in the Northeast is trending cooler.

J.C. Penney gaining traction

Independent analysis of the Sterne Agee data shows that J.C. Penney Company, Inc. (NYSE:JCP) is gaining momentum, with a relative strength index scoring of 55, the fifth best among those retailers studied. Target by contrast, with a 36 rating, was fifth lowest in the study. Short interest in the stock, now standing at 26.1 percent, is the lowest point since November 2013, when short interest stood near the high at 40.3% short interest.

J.C. Penney is also surging as Target Corporation (NYSE:TGT) stores continues to lag. J.C. Penney Company, Inc. (NYSE:JCP) stock may also be a beneficiary of fallout from a competitor, giving it a rare opportunity to grab market share.

Nonetheless Sterne Agee has a neutral weighting on J.C. Penney Company, Inc. (NYSE:JCP).

Hedge fund investors into J.C. Penney

Bill Ackman has been a well known long term investor in J.C. Penney Company, Inc. (NYSE:JCP) who was joined by other hedge fund players in 2013. Highfields Capital, Jana Partners and Farallon Capital Management Group all added exposure to the department store alongside Glenview Capital, which previously had invested in the retailer. In the fall, Jonathon Jacobson’s Highfields Capital was long 3.2 million shares, and Barry Rosenstein’s Jana Partners and Farallon, founded by Tom Steyer both were long 500,000 shares, while Larry Robbins’ of Glenview Capital added 3.9 million shares to his already existing ownership of 12.4 million at the end of 2013, according to a report.