MARKETWATCH

Stocks and bonds fell sharply on Thursday as investors shied away from the markets, possibly because of fears of rising inflation and interest rates. The Commerce Department reported that the gross domestic product grew at a 4.1 percent rate in the second quarter. That was revised upward from a previous estimate of 3.8 percent growth and was much higher than analysts had expected. In addition, the Labor Department reported that there were 11,000 fewer new claims for state unemployment benefits last week -- another sign of growing business activity that could signal increased inflation. In response, the Dow Jones industrial average fell 23.55 points, to 3854.63. The S&P 500 dropped 2.58, to 462.23. NASDAQ stocks declined 0.67, to 759.34. And bond prices declined too, driving the yield on the benchmark 30-year Treasury up to 7.85 percent, compared with 7.80 percent the day before. The price of gold fell 10 cents, to $395.95, in London trading.