U.S. equities posted their worst day of the year Tuesday as banks faced pressure from falling yields, while investors turned their eyes to a key House vote.

The Dow Jones industrial average fell around 240 points, with Goldman Sachs contributing the lion's share of the losses. The S&P 500 dropped 1.2 percent, with financials falling more than 2.5 percent to lead decliners. The indexes were also posted their first decline of at least 1 percent since October.

"We're settling back into the middle of the range in the 10-year yield. That certainly has taken the air out of financials lately," said Art Hogan, chief market strategist at Wunderlich Securities.

U.S. Treasury yields traded mixed, with the benchmark 10-year note yield holding around 2.42 percent and the short-term two-year note yield trading around 1.26 percent.

Yields have been falling since last week, when the Federal Reserve raised rates but provided a more dovish outlook than expected.Weaker yields lead to lower interest rates on loans, which hurt financial stocks, particularly banks.

"I'm not overly worried about [financials'] price action today," said Mark Spellman, portfolio manager at Alpine Funds, noting that the economic backdrop remains bullish for the sector.

The SPDR S&P Bank ETF (KBE) and the Regional Banking ETF (KRE) both fell more than 4.5 percent.

10-year yield in 2017

Source: FactSet

The Nasdaq composite reached a fresh all-time high before closing 1.8 percent lower. Shares of Apple hit an all-time high after the firm announced a new version of its 9.7-inch iPad and special editions for the iPhone 7 and iPhone 7 Plus.

The small-cap Russell 2000 underperfomed, falling around 2 percent.

Retail stocks also took a hit Tuesday, as the SPDR S&P Retail ETF (XRT) dropped nearly 2 percent after Rep. Kevin Brady, the Republicans' chief tax writer in the House, told CNBC that a border adjustment tax will probably appear in the final tax reform plan.

"Importers of course don't see the possibility of 'a very positive way' in any fashion and why the retail stocks today are getting hammered with XRT down," said Peter Boockvar, chief market analyst at The Lindsey Group, in a note.

Stocks had traded mostly sideways recently after a sharp postelection rally. Randy Frederick, vice president of trading and derivatives at Charles Schwab, said "there aren't any catalysts to take the market higher, but there aren't any to derail it either."