The World Russia suspends remaining major nuclear treaty with US

By Vladimir Isachenkov The Associated Press

MOSCOW—Russian President Vladimir Putin declared Tuesday that Moscow was suspending its participation in the New START treaty—the last remaining nuclear arms control pact with the United States—sharply upping the ante amid tensions with Washington over the fighting in Ukraine.

Speaking in his state-of-thenation address, Putin also said that Russia should stand ready to resume nuclear weapons tests if the US does so, a move that would end a global ban on nuclear weapons tests in place since the end of the Cold War.

Explaining his decision to suspend Russia’s obligations under the 2010 New START treaty, Putin accused the US and its Nato allies of openly declaring the goal of Russia’s defeat in Ukraine.

“They want to inflict a ‘strategic defeat’ on us and try to get to our nuclear facilities at the same time,” he said, declaring his decision to suspend Russia’s participation in the treaty. He later sent a draft bill on the pact’s suspension to the Kremlin-controlled parliament, which is expected to quickly rubber-stamp it Wednesday. The document says that it will be up to the Russian president to resume Moscow’s participation in the pact.

Putin emphasized that Russia was not withdrawing from the pact altogether, and hours after his address, the Russian Foreign Ministry said the country would respect the caps on nuclear weapons set under the treaty.

Russia also will continue to exchange information about test launches of ballistic missiles per earlier agreements with the United States, the ministry said.

Noting that the decision to suspend Russia’s participation in New START could be reversed, the Foreign Ministry urged the US to deescalate tensions and create a proper environment for the treaty’s implementation.

The New START treaty envisages caps on the number of nuclear weapons and broad inspections of nuclear sites. Putin said such inspections don’t make sense after the US and its allies declared the goal of dealing Russia a military defeat in Ukraine and helped the Ukrainian military mount strikes

Wall Street tumbles, Dow loses 697 on fears about high rates

By Stan Choe AP Business Writer

NEW YORK—Stocks tum - bled to their worst day in two months Tuesday, buckling under worries about higher interest rates and their tightening squeeze on Wall Street and the economy. on Russian nuclear facilities.

The S&P 500 fell 2 percent for its sharpest drop since the market was selling off in December. The Dow Jones Industrial Average lost 697 points, or 2.1 percent, while the Nasdaq composite sank 2.5 percent.

Home Depot fell to one of the market’s larger losses after giving financial forecasts that fell short of Wall Street’s expectations. It dropped 7.1 percent despite reporting stronger profit for the last three months of 2022 than expected.

The latest evidence came from a preliminary report Tuesday that suggested business activity is gaining momentum. The services industry likely returned to growth last month and was at an eight-month high, according to S&P Global. Manufacturing, meanwhile, may still be contracting, but the reading hit a four-month high.

Such strength has caused the more pessimistic investors on Wall Street to keep their forecasts for a recession but move its timing later into the year.

US Secretary of State Antony Blinken deplored Putin’s move as “deeply unfortunate and irresponsible,” noting that “we’ll be watching carefully to see what Russia actually does.”

He said that “we’ll, of course, make sure that in any event we are postured appropriately for the security of our own country and that of our allies,” but emphasized that “we remain ready to talk about strategic arms limitations at any time with Russia irrespective of anything else going on in the world or in our relationship.”

“I think it matters that we continue to act responsibly in this area,” Blinken told reporters on a visit to Greece. “It’s also something the rest of the world expects of us.”

Nato Secretary-General Jens Stoltenberg also voiced regret about Putin’s move, saying that “with today’s decision on New START, full arms control architecture has been dismantled.”

“I strongly encourage Russia to reconsider its decision and respect existing agreements,” he told reporters.

Putin argued that while the US has pushed for the resumption of inspections of Russian nuclear facilities under the treaty, Nato allies had helped Ukraine mount drone attacks on Russian air bases hosting nuclear-capable strategic bombers.

The Russian military said that it shot down the Soviet-built drones that struck two bomber bases deep inside Russia in December, but acknowledged that several servicemen were killed by debris that also damaged some aircraft.

Putin on Tuesday mocked Nato’s statement urging Russia to allow the resumption of the US inspections of Russian nuclear weapons sites as “some kind of theater of the absurd.”

“The drones used for it were equipped and modernized with

Nato’s expert assistance,” Putin said. “And now they want to inspect our defense facilities? In the conditions of today’s confrontation, it sounds like sheer nonsense.”

Putin described the US push for access to Russian nuclear sites as “the height of hypocrisy and cynicism.”

“They want to inflict a ‘strategic defeat’ on us and at the same time, they keep trying to get to our nuclear facilities,” he charged.

He noted he signed an order a week ago to deploy new land-based strategic missiles and asked: “Are they also going to poke their noses there?”

The Russian leader also alleged that a Nato statement on New START raised the issue of the nuclear weapons of Britain and France, which are part of the alliance’s nuclear capability but aren’t included in the US-Russian pact.

“They are also aimed against us. They are aimed against Russia,” Putin said of the European weapons. “Before we return to discussing the issue, we need to understand what are the aspirations of Nato members Britain and France and how we take it into account, their strategic arsenals that are part of the alliance’s combined strike potential.”

Then-presidents Barack Obama and Dmitry Medvedev signed the New START treaty in 2010. The pact limits each country to no more than 1,550 deployed nuclear warheads and 700 deployed missiles and bombers. The agreement envisages sweeping on-site inspections to verify compliance.

Just days before the treaty was due to expire in February 2021, Russia and the United States agreed to extend it for another five years.

Russia and the US have suspended mutual inspections under New START since the start of the Covid-19 pandemic, but

Moscow last fall refused to allow their resumption, raising uncertainty about the pact’s future. Russia also indefinitely postponed a planned round of consultations under the treaty.

The US State Department has said that Russia’s refusal to allow the inspections “prevents the United States from exercising important rights under the treaty and threatens the viability of USRussian nuclear arms control.” It noted that nothing prevents Russian inspectors from conducting inspections of US facilities.

Putin on Tuesday challenged the US assertion, alleging that Washington has rejected some Russian requests for visits to specific US facilities.

“We aren’t allowed to conduct full-fledged inspections under the treaty,” he said. “We can’t really check anything on their side.”

He alleged that the US was working on nuclear weapons and some in the US were pondering plans to resume nuclear tests banned under the global test ban that took effect after the end of the Cold War.

“In this situation, Rosatom [Russia’s state nuclear corporation] and the Defense Ministry must ensure readiness for Russian nuclear weapons tests,” Putin said. “We naturally won’t be the first to do it, but if the US conducts tests we will also do it. No one should have dangerous illusions that the global strategic parity could be destroyed.” the United Nations contributed to this report

UN Secretary-General Antonio Guterres called for Russia and the US to immediately return to dialogue because “a world without nuclear arms control is a far more dangerous and unstable one with potentially catastrophic consequences,” UN spokesman Stephane Dujarric said.

The retailer said it would spend $1 billion to increase wages for hourly US and Canadian workers. That fed into broader worries for markets that rising costs for companies have been eating into profits, which are one of the main levers that set stock prices.

The other main lever is also looking precarious as interest rates continue to rise. When safe bonds are paying higher amounts of interest, they make stocks and other investments look less attractive. Why take a lot of risk on stocks if safer things are paying out more? Higher rates also raise the risk of a recession because they slow the economy in hopes of snuffing out inflation.

Rates and stock prices are high enough that strategists at Morgan Stanley say US stocks look to be more expensive than at any time since 2007.

The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, leaped further to 3.95 percent from 3.82 percent late Friday. The two-year yield, which moves more on expectations for the Fed, rose to 4.72 percent from 4.62 percent. It’s close to its highest level since 2007.

“That is what’s weighing on the market,” said Keith Lerner, chief market strategist at Truist Advisory Services.

Yields have shot higher this month as Wall Street ups its forecasts for how high the Federal Reserve will take short-term interest rates in its efforts to stamp out inflation. The Fed has already pulled its key overnight rate up to a range of 4.50 percent to 4.75 percent, up from basically zero at the start of last year.

Several reports have come in recently to show the economy remains stronger than expected. Those allay fears that the economy may soon fall into a recession, which is a positive for the market. But on the negative side, they could also fuel upward pressure on inflation and give the Fed more reason to stick to the “higher for longer” campaign it’s been espousing for rates.

The Fed said in December that its typical policy maker sees shortterm rates rising to 5.1 percent by the end of this year with the earliest cut to rates happening in 2024. After earlier thinking the Fed would ultimately take it easier on rates than it was talking about, Wall Street has largely come into closer alignment with the Fed’s view.

The worry is that the Fed could ratchet up its forecasts for rates further next month when it releases its latest projections for the economy. Besides showing more strength in the job market and retail sales than expected, recent reports have also suggested inflation is not cooling as quickly and as smoothly as hoped. Investors are also pushing back their forecasts for when the first cut to rates could happen.

Those worries have caused a stall for the strong rally by Wall Street to start the year. After earlier jumping as much as 8.9 percent, the S&P 500 is now clinging to a gain of 4.1 percent for the year so far.

Another threat for the market is that the Fed may not be as quick to cut rates in the face of economic weakness as it has in the past, said Truist’s Lerner.

“This is the first time in over a decade the Fed has had to worry about inflation,” he said. “What happened last year has created scar tissue that could keep rates higher for longer.”

“When we do have a downturn, the Fed is not going to be as aggressive as they have in the past. They may still be thinking about inflation.”

While the job market and consumer spending have been resilient in the face of higher interest rates, some pockets of the economy are showing more weakness. A report on Tuesday showed sales of previously occupied homes slowed to their slowest pace in more than a decade.

Homebuilder stocks fell after the report, including a 4.4 percent drop for D.R. Horton.

All told, the S&P 500 fell 81.75 points to 3,997.34. The Dow lost 697.10 to 33,129.59 and is down for the year to date. The Nasdaq fell 294.97 to 11,492.30.

In stock markets abroad, shares mostly fell after manufacturing indicators in Europe and Asia painted a mixed picture and Russian President Vladimir Putin accused Western countries of threatening Russia. AP Business Writers Yuri Kageyama and Matt Ott contributed