It was City's fourth 0-0 draw at home this season but Pearce was pleased to keep another clean sheet.
"To be fair, if it wasn't for their goalkeeper (Lee) and Shittu, Watford could have been embarrassed," Pearce said.
"We matched them physically man-for-man but never really had the chance to get the ball down and play. Whilst I am frustrated about that, a lot of that is down to the way they played and what they allowed us to do.
"We've played 8 matches (at home) and conceded 1 goal, so we are doing something right at the back but we are disappointed that their keeper's played well and that Shittu's got the odd block on.
"I've got to take the positives from it. My goalkeeper's not had to make a save in the 2nd half, so I think we were unfortunate not to win the game. They stifled the game, and it was almost a game of fisticuffs, and they might be better at fisticuffs than we are."
The point edged us above Fulham into 10th before Tottenham's win over Middlesbrough last night.
"We're in the top half for the 1st time this season so I've got a feeling it was a point gained rather than points lost," added Pearce.