New York - Stocks and the euro sold off on Wednesday as Italian borrowing costs reached a breaking point, and investors feared the euro zone's third largest economy could be facing a debt crisis similar to that of Greece.With a debt burden of about 1.9 trillion euros (1.6 trillion pounds), Italy is considered too difficult to bail out, and a default would probably dry out credit and bring Europe to a recession.Yields on 2-year and 10-year Italian bonds rose above 7 percent. The curve measuring the yields inverted for the first time in the euro era -- a clear signal of rising concern among investors that they may not get their money back."You have this fear of default which is clearly driving up bond yields. This sparks the need to enforce austerity, at least some people believe," said Joseph Tanious, market strategist at J.P. Morgan Funds in New York."That only creates a fiscal drag and pushes these European economies, which are already on the brink of a recession, deeper into the hole and that only exacerbates the issue and creates this negative feedback loop."After the opening bell in New York, the Dow Jones industrial average .DJI dropped 229.17 points, or 1.88 percent, to 11,941.01. The S&P 500 .SPX fell 27.40 points, or 2.15 percent, to 1,248.52. The Nasdaq Composite .IXIC lost 60.76 points, or 2.23 percent, to 2,666.73.World stocks as measured by MSCI were down 1.8 percent, while in Europe the FTSEurofirst 300 lost 1.7 percent.The euro slid 1.7 percent versus the U.S. dollar.