Mr. Gradgrind walks back to his home, called Stone Lodge, he thinks with satisfaction about the education of facts that his young children are receiving, both at home and at school. But he cannot believe his eyes when he sees his two children, Louisa Gradgrind and Tom Gradgrind, peeping into a circus tent. This circus, by the way, features a horse-rider named Signore Jupe who seems likely to be Sissy's father.
The very name of the Gradgrind household reflects how stony its owner's heart is. Additionally, the sighting of his children at the circus is, significantly, the first time Mr. Gradgrind is presented with evidence that children's imaginations cannot be stamped out entirely by a rigorous education of facts. He's not happy about it.
In accordance with his beliefs that children should focus solely on facts and not on imagination and fun, he angrily pulls them away from the circus. Louisa, who is sixteen and a good deal older than Tom, speaks clearly in defense of herself that her curiosity compelled her to get a glimpse of the circus, and tries to clear her brother of any blame by saying she brought him along. Mr. Gradgrind just scolds them as he takes them home, and adds, "What would Mr. Bounderby say?"
Louisa's unwillingness to embrace her father's beliefs about avoiding circuses and the way in which she stands up right away for her younger brother forecast her attitudes in both of those areas as an adult. The ridiculous way in which Mr. Gradgrind drags his children away from the circus shows how little he understands the natural curiosity of children. Gradgrind's final comment about Bounderby indicates that Bounderby agrees with sentiments, and foreshadows Bounderby's importance to come.