What does "awe nutz!" mean?

While we were still surrounded, on the morning of December 22, a German surrender party, consisting of two officers and two NCOs, and carrying a white flag, approached our perimeter in the area of our Glider Regiment, the 327th. The party was taken to a nearby platoon command post. While the enlisted men were detained the officers were blind folded and taken to the command post of the 327th where they presented their surrender ultimatum. The ultimatum in essence said the 101st's position was hopeless and that if we elected not to surrender a lot of bad things would happen.

The message was brought in to the Division Headquarters by Major Alvin Jones, the S-3, and Colonel Harper, the Regimental Commander. They brought the message to me, the G-3 and Paul Danahy, the G-2. My first reaction was that this was a German ruse, designed to get our men out of their fox holes. But be that as it might, we agreed that we needed to take the message up the line. We took it first to the acting Chief of Staff of the Division, Lt. Col. Ned Moore. With him, we took the message to the acting Division Commander General Tony McAuliffe. Moore told General McAuliffe that we had a German surrender ultimatum. The General's first reaction was that the Germans wanted to surrender to us. Col. Moore quickly disabused him of that notion and explained that the German's demanded our surrender. When McAuliffe heard that he laughed and said: "Us surrender? Aw, nuts!"

But then McAuliffe realized that some sort of reply was in order. He pondered for a few minutes and then told the staff, "Well I don't know what to tell them." He then asked the staff what they thought, and I spoke up, saying, "That first remark of yours would be hard to beat." McAuliffe said, "What do you mean?" I answered, "Sir, you said 'Nuts'." All members of the staff enthusiastically agreed, and McAuliffe decided to send that one word, "Nuts!" back to the Germans.