* Investors concerned over fallout from default
* Whole Foods tumbles after cutting outlook
* Jobless claims on tap, seen up from previous week
* Futures down: Dow 85 pts, S&P 11.5 pts, Nasdaq 25.25 pts
NEW YORK, July 31 (Reuters) - U.S. stock index futures were sharply lower on Thursday, after Argentina defaulted for the second time in 12 years, raising concerns the country's weakness could spread to the region.
* The drop in futures indicated one of the biggest daily declines for Wall Street since July 17, when the S&P 500 fell more than 1 percent after a Malaysian passenger jet was shot down in Ukraine, stoking concerns that that crisis would have a wider global reach. A big market decline would mean that all three major U.S. indexes may lose their gains for July, which had been set to be the sixth positive month for both the Dow and S&P 500.
* Investors had hoped for a midnight deal with holdout creditors in Argentina, but the plan fell through. Even a short default will raise companies' borrowing costs, add to pressure on the peso, drain dwindling foreign reserves and fuel one of the world's highest inflation rates.
* S&P 500 e-mini futures fell 11.5 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average e-mini futures fell 85 points and Nasdaq 100 e-mini futures lost 25.25 points.
* For July, the Dow is up 0.3 percent, the S&P is up 0.5 percent and the Nasdaq is up 1.2 percent. If the Nasdaq ends higher for July, it would be its third straight positive month.
* Despite the weakness implied by futures, conditions in the U.S. continued to support equities, which are near record levels. On Wednesday, the Federal Reserve gave a rosier assessment of the U.S. economy while reaffirming it was in no hurry to raise interest rates.
* Earnings have also been strong, with more companies than usual beating expectations for earnings and revenue this quarter, though there were some notable disappointments. Late Wednesday, Whole Foods Markets Inc cut its 2014 forecasts for a fourth time, sending shares down 5.3 percent to $37.03 in premarket trading.
* Cigna Corp reported second-quarter earnings that beat expectations while Time Warner Cable Inc posted a rise in both earnings and revenue.
* Akamai Technologies declined 5.9 percent to $57.17 in light premarket trading, a day after it fell short of investor hopes it would exceed its own revenue forecast due to heavy World Cup traffic.
* Investors anticipated weekly jobless claims data, seen rising to 301,000 from 284,000 in the previous week. That comes ahead of the closely watched payrolls report due out Friday, which is expected to show fewer jobs created in July than June.
(Editing by Bernadette Baum)