U.S. equity markets were declining sharply Tuesday morning as investors remained apprehensive regarding the state of the nation's largest banks.

Investors are concerned about the possibility of bank nationalizations, said Matthew Carniol, chief currency strategist at TheLFB-forex.com. The effects of Mr. Geithner's speech from last week are still reverberating.

The part of the speech most troubling dealt with the stress-tests that the government will perform. No one understands the pass/fail criteria, or what might be the ultimate fate of a bank which fails the test.

Financials were leading the declines, with the XLF financial sector ETF down 7.57% on the day so far. The DOW was lower by 3.42% in recent trade, while the broader S&P 500 was off by 4.13%. The technology-focused NASDAQ was lower by 3.81%.

The dollar was the main beneficiary of the risk-aversion move, with a gain of 1.84% against the euro, 2.08% on Australia's dollar and 0.68% on the pound. The yen, which usually gains in these situations, was lower by 0.81% against the greenback.

Treasuries rose as stocks were sold, with the benchmark 10-year note down 21 basis points to 2.69%, a three-week low. Two-year note yields fell nine basis points to 0.87%.

Crude for March delivery was recently trading lower by $2.56 (-7.04%) to $34.86 per barrel.

Gold for April delivery was trading higher by a massive $29.80 (3.17%) to $971.30.