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Pentagon unveils new nuclear weapons strategy, ending Obama-era push to reduce US arsenal

February 3, 2018 by  
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The Pentagon released a new nuclear arms policy Friday that calls for the introduction of two new types of weapons, effectively ending Obama-era efforts to reduce the size and scope of the U.S. arsenal and minimize the role of nuclear weapons in defense planning. 

Defense Secretary Jim Mattis said in an introductory note to the new policy — the first update to the military’s nuclear strategy since 2010 — that the changes reflect a need to “look reality in the eye” and “see the world as it is, not as we wish it to be.”

 The previous administration’s policy hinged on what President Barack Obama called a moral obligation for the United States to lead by example in ridding the world of nuclear weapons. Officials in the Trump administration and the U.S. military argue that Obama’s approach proved overly idealistic, particularly as relations with Moscow soured. Russia, China and North Korea, they say, all advanced their nuclear weapons capabilities instead of following suit.

“Over the past decade, while the United States has led the world in these reductions, every one of our potential nuclear adversaries has been pursuing the exact opposite strategy,” Deputy Energy Secretary Dan Brouillette said at a Pentagon news conference, explaining why the United States is changing course. “These powers are increasing the numbers and types of nuclear weapons in their arsenal.”

The new nuclear weapons policy follows on Donald Trump’s promise before taking office to expand and strengthen U.S. nuclear capabilities. President Trump also vowed during his State of the Union address Tuesday to build a nuclear arsenal “so strong and powerful that it will deter any acts of aggression.” 

The threats have changed dramatically since the last time the Pentagon updated its nuclear weapons policy, with Russia reemerging as a geopolitical foe. North Korea, meanwhile, has edged closer to possessing a missile capable of striking the U.S. mainland with a nuclear warhead, bringing the prospect of nuclear war back to the forefront of the American psyche for the first time since the Cold War. 

Trump’s perceived volatility has raised more concerns among Americans about the president’s exclusive authority to order a nuclear attack. His warning last summer that he would unleash “fire and fury like the world has never seen” on North Korea marked a rare public threat by a U.S. president to use nuclear weapons.

The policy unveiled Friday envisions the introduction of “low-yield nukes” on submarine-launched ballistic missiles. Despite being called “low yield,” such weapons could cause roughly as much damage as the bombings of Hiroshima and Nagasaki in Japan, depending on their size.

Russia possesses a wide variety of small nuclear weapons that the United States mostly lacks. The Pentagon worries Moscow could seize part or all of a U.S. ally state and then detonate one in a “limited nuclear attack” to prevent American troops from coming to the rescue. Washington would be forced to choose between launching a much larger-scale nuclear attack on Russia or responding with less substantial conventional arms. The Pentagon says it wants a proportionate weapon to match.

John C. Rood, undersecretary of defense for policy, said the United States would not be increasing the number of warheads in its stockpile, which has contained other low-yield weapons for years.

In a veiled reference to Russia, Rood said the new low-yield missiles would ensure that adversaries “do not come to the mistaken impression” they can use small battlefield nuclear weapons because “we don’t have credible response options.”

The new Pentagon policy also outlines longer-term plans to reintroduce a nuclear submarine-launched cruise missile called an SLCM (or “slick-em”), which the administration of President George H.W. Bush stopped deploying and the Obama administration ordered removed from the arsenal.

Officials say the SLCM would reassure Japan and South Korea in the face of threats from North Korea and put pressure on Russia to stop violating the Intermediate-Range Nuclear Forces Treaty. Unlike with the low-yield weapon, which the Pentagon plans to develop quickly, the SLCM’s reintroduction could be many years away.

The Pentagon confirmed its commitment to the modernization of the U.S. nuclear force that Obama approved in 2010 in exchange for Senate ratification of the New Strategic Arms Reduction Treaty, or New START. The military will introduce new bombers, submarines and intercontinental ballistic missiles, as well as a new cruise missile for the bomber. The Congressional Budget Office estimates the plan will cost about $1.2 trillion over 30 years.

After a draft of the new policy leaked in mid-January, disarmament advocates assailed the Trump administration for pursuing what they described as unnecessary new nuclear weapons that could start an arms race and increase the likelihood of nuclear war.

Critics also accused the Defense Department of lowering the threshold for what might provoke a U.S. nuclear strike by mentioning cyberattacks in the list of non-nuclear strategic threats. 

At the Pentagon, officials denied those accusations. They said the new policy, if anything, raises the threshold for nuclear strikes. They reiterated the Pentagon’s long-standing policy that says nuclear weapons can be used only in “extreme circumstances.”

The return of “great power competition” with Russia and threats from China, North Korea and Iran render progress toward any weapons reductions at this time “extremely challenging,” the new policy says.  

Alex Bell, an Obama administration official and disarmament advocate at the Arms Control Association, criticized the Pentagon for effectively abandoning the quest for nuclear reductions, saying it is treating the goal of eliminating nuclear weapons that Obama heralded in a 2009 speech in Prague as “an afterthought.”

“You have a clear message to the world that this administration is not interested in leading global efforts to reduce nuclear threats,” Bell said. She warned that Trump’s boasting about an expanding U.S. nuclear arsenal could set off “a new nuclear arms race.” 

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Dow sees worst day in two years as bond yields jump

February 3, 2018 by  
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NEW YORK (Reuters) – Worries about the impact of a tightening job market on the prospects for inflation and a surge in bond yields sent investors fleeing equities on Friday, with the Dow Jones Industrials Average swooning almost 666 points, for its biggest daily percentage loss in 20 months.

It was the biggest daily point fall in the Dow since December 2008 during the financial crisis.

With Friday’s rout, Wall Street’s three major indexes logged their biggest weekly losses in two years, after closing at record highs the previous week. The SP 500 and Dow saw their worst weeks since early January 2016 while Nasdaq had its worst week since early Feb 2016.

“People are starting to really get increasingly uncomfortable with the rapid rise in interest rates that we have seen and the uncertainty of how that is actually going to start to play out relative to competition for stocks,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

Overnight stock price losses accelerated after the U.S. Labor Department reported employment grew more than expected in January with the biggest wage gain in more than 8-1/2 years. The picture of workers commanding higher salaries fueled expectations that inflation is on the rise, which could prompt the Federal Reserve to take a more aggressive approach to rate hikes this year.

That caused the 10-year Treasury yield to surge to 2.8450 percent the highest since Jan. 2014, which could make returns on Treasuries look more attractive relative to stocks.

But market players are not convinced that the bull market in stocks that that saw the SP 500 rise 5.6 percent in January is over. In fact many say a pull back was overdue.

“You have a jobs report today that was pretty robust all kind of feeding into the higher interest rates, greater inflation story, and I think the markets are trying to grapple with that right now,” said Carlson.

The Dow Jones Industrial Average .DJI fell 665.75 points, or 2.54 percent, to 25,520.96, the SP 500 .SPX lost 59.85 points, or 2.12 percent, to 2,762.13 and the Nasdaq Composite .IXIC dropped 144.92 points, or 1.96 percent, to 7,240.95.

SP 500 e-mini stock futures EScv1 extended losses after 4 p.m. ET close in the cash market. SP 500 futures closed down 2.3 percent, the biggest daily percentage drop since September 2016.

All 11 major sectors of the SP 500 closed down. Technology .SPLRCT weighed the heaviest, with Microsoft (MSFT.O) pulling the sector down 3.0 percent.

The CBOE Volatility Index .VIX, the most widely followed barometer of expected near-term volatility for the SP 500 Index rose more than four points to 17.86, its highest since November 2016. VIX options trading volume hit a record high.

Analysts now see fourth-quarter earnings growth of 13.6 percent for the SP 500, up from 12 percent on January 1. Half of the index’s companies have reported, 78 percent of which beat Street expectations, according to Thomson Reuters data.

Exxon Mobil Corp (XOM.N) and Chevron Corp (CVX.N) shares were down 5.1 percent and 5.6 percent, respectively, after the oil companies posted lower-than-expected fourth-quarter profit.

Alphabet (GOOGL.O) fell 5.3 percent after the Google parent’s fourth-quarter profit came in below consensus on increased spending.

Apple (AAPL.O) shares were off by 4.3 percent as investors worried about the iPhone maker’s weak outlook amid reports of scaled back iPhone X production.

Amazon.com (AMZN.O) was a bright spot, up 2.9 percent as Wall Street analysts quickly upped their price targets following the online retailer’s impressive earnings report.

Declining issues outnumbered advancing ones on the NYSE by a 7.70-to-1 ratio; on Nasdaq, a 3.90-to-1 ratio favored decliners.

The SP 500 posted 18 new 52-week highs and 18 new lows; the Nasdaq Composite recorded 48 new highs and 103 new lows.

Volume on U.S. exchanges was 5.39 billion shares, compared to the 7.33 billion average for the full session over the last 20 trading days.

  • Analyst View: U.S. stocks extend rout as bond yields churn higher

Reporting by Stephen Culp; editing by Clive McKeef

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