Pedestrians walk along Wall Street across from the New York Stock Exchange. Michael Nagle | Bloomberg | Getty Images

Financial stocks led market declines Tuesday as Treasury yields fell and traders grew anxious about government policy ahead of Friday's inauguration.

The SPDR S&P Bank ETF (KBE) fell nearly 3.4 percent in its worst day since June 27, 2016. Financials declined nearly 2.3 percent as the greatest laggard in the S&P 500, which lost 6.75 points Tuesday. "I think financials are way, way ahead of themselves," said Jeremy Klein, chief market strategist at FBN Securities. The sector is up more than 17 percent since the election as the top performer in the S&P 500.

Klein noted President-elect Donald Trump's press conference last week was "very unorthodox" and then unconventionally said the U.S. dollar was "too strong" in an interview with The Wall Street Journal. "People are getting concerned, maybe it's not full steam ahead," Klein said.

Bank ETF (KBE) 12-month performance



Source: FactSet The U.S. 10-year Treasury yield hit a low of 2.305, its lowest since Nov. 30, 2016, while the U.S. dollar index fell to 100.3, its lowest since Dec. 8, 2016.

Both assets had rallied sharply, along with financials, following Trump's surprise election win on promises of tax reform, infrastructure spending and deregulation. "This is a market that on election night and the next day pushed through all this [uncertainty] and focused on pro-growth and pro-business" policies, said Quincy Krosby, market strategist at Prudential Financial. "And anything that deviates from that is going to account for a pullback." Krosby said stocks are caught in a trading range. "It could go in either direction, and Friday will probably be the primary source for deciding which direction it goes," she said.

