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A wave of anxiety is sweeping through stock and bond markets as investors prepare to enter a new phase of the pandemic.

What’s happening: Concerns are growing that a strong economic recovery later this year will cause a spike in inflation. That’s sparked a selloff in government bonds. When prices fall, yields rise, which weighs on stocks.

Without a sharp bump on Friday, the S&P 500 — which has dropped in the last three trading sessions — will notch its third consecutive week of declines, as the yield on the benchmark 10-year US Treasury moves back toward 1.6%.

“With the Covid-19 vaccine allowing for economic activity to be restored, coupled with fresh injections of fiscal stimulus in the pipeline, investors are holding on to the narrative that inflation could make a roaring comeback,” FXTM market analyst Han Tan told clients on Friday.

In recent days, Wall Street has become laser-focused on one big question: If significantly higher prices do materialize, will Federal Reserve Chair Jerome Powell and other policymakers have the stomach for it?

Powell said at an event on Thursday that he does expect inflation to rise as the economy reopens. But he emphasized that the Fed does not intend to change course as a result, since low interest rates and bond purchases will continue to be necessary to support the ongoing recovery.

“Compared to the economic scenarios we contemplated a year ago, it’s good to see where we are,” Powell said. The Fed, he added, will try to differentiate between a “one-time surge in prices and ongoing inflation.”

Easy monetary policies like rock-bottom interest rates have been a boon for riskier investments like stocks over the past year. Wall Street is worried the mood could change when rates start to rise again.

Such fears are top of mind with Friday’s jobs report on tap. Economists surveyed by Refinitiv expect to learn that the US economy added 182,000 jobs in February, up from 49,000 in January.

That’s certainly an improvement, but would still leave Americans down millions of jobs since the start of the pandemic. Such a reading may reassure Wall Street that any talk of the Fed tightening policy is premature.

Investors will be particularly alert for unexpected signs of wage inflation, however. Average hourly earnings are forecast to have risen by 0.2%.

Watch this space: US prices don’t exist in a vacuum. One of the reasons inflation has been so low in recent decades has been thanks to China, which has served as a global factory for low-cost goods.

The country said Friday that it would target economic growth of more than 6% in 2021. A strong recovery in China could help keep prices low. But there are some concerns that economic scarring from the pandemic has permanently hurt supply chains and reduced manufacturing capacity. That dynamic could contribute to inflation.

Oil prices surge after producers extend production cuts

Countries are beginning to look toward life after the pandemic. But oil producers, nervous about upsetting delicate price dynamics, aren’t racing to put more barrels on the market.

The latest: The Organization of the Petroleum Exporting Countries and allies said Thursday that they would largely roll over production cuts during the month of April, my CNN Business colleague Charles Riley reports.

Two countries — Russia and Kazakhstan — were granted exemptions to increase their output by a small amount.

Remember: The OPEC+ group agreed in January to keep production steady for February and March. At that time, Saudi Arabia surprised markets by pledging to cut its production by an extra 1 million barrels per day, a move that reflected unease about fragile demand.

Saudi Arabia agreed on Thursday to extend its extra cut through April. Including that contribution, the broader group’s supply cuts amount to nearly 8 million barrels per day.

In recent months, rising prices have made producers more confident that the market is on solid footing following its pandemic crash. But for now, the group is opting to play it safe.

Investor insight: Oil prices are jumping as a result. US oil was last trading above $65 per barrel for the first time since January 2020. Brent crude futures, the global benchmark, are near $68.50.

UBS oil analyst Giovanni Staunovo thinks US oil prices will rise to $72 per barrel later this year if the expected surge in demand for energy materializes as economies reopen.

“With a cautious approach from OPEC+ and limited production growth outside the group, oil inventories are likely to fall at a fast pace in April,” Staunovo told clients.

That would continue to support prices. Customers could also start to pay more for gas at the pump. AAA said Thursday that the US average for a gallon of regular gasoline has increased by two cents this week to $2.74.

A container shortage is hitting companies like Costco

A global shortage of shipping containers triggered by the pandemic is squeezing companies around the world.

Costco (COST) is the latest to sound the alarm. Chief Financial Officer Richard Galanti told analysts after markets closed on Thursday that container shortfalls contributed to delays in delivering furniture, sporting goods, lawn and garden equipment and even some food items, including seafood, imported cheeses and oils.

“We expect these pressures to ease in the coming months, but it’s impacting everyone, of course,” Galanti said.

What’s happening: According to Hillebrand, a logistics company, containers were stranded in North America and Europe at the beginning of the pandemic and couldn’t make their way back to Asia. There was no time to clear the backlog before more started coming in.

The firm says that production of new containers remains “woefully low,” and prices for those on the market has skyrocketed. Hillebrand doesn’t expect the situation to normalize until later this year.

Costs are being passed on to customers like Costco, which said Thursday that sales increased nearly 15% from one year ago in its most recent quarter as customers continue to stock up on food and cleaning supplies. Shares are down nearly 2% in premarket trading.

Up next

The US jobs report for February posts at 8:30 a.m. ET.

Coming up: It’s been nearly a year since markets crashed as Covid-19 fears overtook Wall Street. Check back Sunday for a look at what’s happened since then — and where we could be heading next.