Chief economist at Avalon Partners Peter Cardillo

Despite falling 140 points before the market opened, because of disappointing corporate earnings, the Dow Jones Industrial Average closed more than half a percent higher on Tuesday.  A Wall Street economist says the mixed signals reflect an exaggerated unease about the slow pace of recovery in the U.S. and around the world.  But he says the global economic recovery is in no danger of jumping off the tracks.

Investor pessimism was high even before markets opened in the US.
A Commerce Department report showing that new home construction fell to an eight-month low in June - only added to the unease.

But key indexes rose sharply as the day wore on.

Chief economist Peter Cardillo at Avalon Partners blamed uncertainty for the market volatility.

"The market is basically focusing on the fact that the economy has slowed," said Peter Cardillo. "The question is how slow is slow and what does it mean for future earnings going forward. "

Despite what he calls overblown fears of a double-dip recession, Cardillo predicts the U.S. economy will grow between two and a half to three percent for the second half of the year. 

As for worries about a larger debt crisis in Europe:

"The EU is certainly not in danger of disintegrating," said Cardillo. "I don't believe that the euro is in trouble.  There are problems but they are short-term problems and they've been over-exaggerated by the market."

And despite new signs that China's economy is slowing down, Cardillo says the rest of the global economy is doing just fine.

"I think Asia is doing well, South America is doing well and believe it or not, there's certain parts of Africa that have kicked in, so the global economy is doing fine," he said.

But Cardillo says that's not to say that all is well on the financial front.  He is worried about the impact Wall Street Reform will have on big investment firms, once the president signs the bill into law on Wednesday.

With U.S. unemployment near double digits, Cardillo cautions the Obama administration to tone down its rhetoric against Wall Street - something political analysts say is unlikely with U.S. mid-term elections only months away.