July 8, 1981

The Producer Price Index for finished goods rose six-tenths of 1 percent in June as food prices increased for the first time in seven months, the Bureau of Labor Statistics reported. Although the June rise exceeded May's unusually small gain of four-tenths of 1 percent, it was still small enough to support the Reagan Administration's contention that inflation has fallen below the ''double-digit'' rate of 10 percent a year. (Page Dl.) The Administration said that it would strongly resist protectionist pressures and mount vigorous challenges to subsidized competition and other trade-distorting measures by foreign governments. The longawaited policy statement on trade, which was approved by the Cabinet, underscores the Administration's commitment to market forces as its guiding principle in foreign trade. (D2.)

A valve at an aqueduct was opened here today, apparently by vandals, starting a chain reaction that burst two huge pipelines and cut off Newark from its main water supply. ''It's an imminent catastrophe,'' said James F. Conley, the chief engineer of Newark's Division of Water Supply. Mr. Conley said that unless the city could activate two existing pipeline interconnections with three other water supply systems and could build two new ones, parts of Newark ''will be out of water'' in five days. Other Communities Affected The pipelines that ruptured, he said, normally carry about 75 million of the 120 million gallons a day used by 600,000 people in Newark and parts of Elizabeth, Bloomfield, Belleville and Wayne. Those four other communities, all of which purchase some of their water from Newark, began planning for alternative supplies. Mayor Kenneth A. Gibson of Newark declared a water emergency in the early afternoon, prohibiting all nonessential uses of water, including lawn watering, car washing and opening of hydrants for any purposes other than firefighting.

SUPREME COURT BY STEVEN R. WEISMAN WASHINGTON, July 7 - President Reagan announced today that he would nominate Sandra Day O'Connor, a 51-year-old judge on the Arizona Court of Appeals, to the United States Supreme Court. If confirmed, she would become the first woman to serve on the Court. ''She is truly a 'person for all seasons,' '' Mr. Reagan said this morning, ''possessing those unique qualities of temperament, fairness, intellectual Remarks on Court post, page A12. capacity and devotion to the public good which have characterized the 101 'brethren' who have preceded her.'' White House and Justice Department officials expressed confidence that Judge O'Connor's views were compatible with those espoused over the years by Mr. Reagan, who has been highly critical of some past Supreme Court decisions on the rights of defendants, busing, abortion and other matters.

Gov. William A. O'Neill signed a bill today allowing doctors to prescribe marijuana cigarettes for patients suffering from glaucoma or the side-effects of cancer treatments. The General Assembly defeated a similar bill in 1980, when even Ella T. Grasso, then Governor, who suffered from prolonged nausea after radiation treatment for cancer, declined to support the idea. This spring, however, the House of Representatives unexpectedly passed the bill after Representative Robert C. Sorensen, Democrat of Meriden, told a hushed chamber he was undergoing chemotherapy and on some days faced pain so severe he could not stand erect.

The Reagan Administration plans to announce shortly that while it is committed to halting the spread of nuclear weapons abroad the United States will be a ''clearly reliable and credible'' supplier of nuclear technology for peaceful purposes. This policy is contained in an eight-point set of guidelines that has been prepared by the State Department and submitted to the White House. The White House is expected to issue the list before a meeting in Ottawa July 20-21 of the leaders of seven industrial nations. The spread of nuclear weapons will be one of the items on the agenda.