Financial stocks drag broader market south

(MarketWatch) -- U.S. financial stocks on Tuesday were the worst-performing sector in the S&P 500 Index, closing down 2.4% as worries over European banks and sovereign debt moved back into the foreground.

The Financial Select Sector SPDR Fund (CONSOLIDATED:XLF) shed 2.3% with Hartford Financial Services Group Inc. (NYSE:HIG) and Lincoln National Corp. (NYSE:LNC) leading the decline.

The Treasury Department on Tuesday said it plans to sell its warrants in Hartford and Lincoln that it received under the bank bailout.

Stocks were in the red after the holiday weekend, and Europe's sovereign debt risks were back in the headlines. The Wall Street Journal reported the so-called stress tests for banks understated holdings of government debt. (more)