At 11am AEST, the first named storm of the Atlantic hurricane season was packing maximum winds of 160 kilometres per hour and was located about 89 kilometres east-northeast of Cape Fear, North Carolina, the National Hurricane Center said.
North Carolina Governor Pat McCrory said emergency preparation efforts had been made more complicated by the arrival of thousands of tourists, who have flocked to beaches for the annual summer holiday pilgrimage.
Heavy rain and strong winds lashed the North Carolina coast, but the eye of the storm was not forecast to hit until the evening, when it was expected to become a category-two storm, before heading up the coast and threatening areas as far north as Nova Scotia in Canada.
Thousands of people were already without power in the state, news reports said, and there was localized flooding in areas including the coastal city of Wilmington.
"Our main issue is the health and safety of our citizens and those people who are visiting North Carolina," McCrory said.
Emergency declarations were issued by several counties in the southern state, which opened emergency shelters and ordered evacuations in low-lying areas.
"As the hurricane moves north, more counties are likely to declare a state of emergency," McCrory added.
National Hurricane Center forecasters warned of "large and damaging waves" and cautioned: "Preparations to protect life and property should be rushed to completion."
McCrory urged residents and tourists to use common sense, to stay out of the water and out of harm's way, with storm surges of up to five feet (1.5 meters) predicted.
"Don't put your 'stupid hat' on," McCrory said.
"Let's hope for the best, pray for the best, that Arthur clears out quickly so we can all get back to celebrating our country's independence, with our families and friends on North Carolina's beautiful beaches."
As many as half a million visitors had been expected in the coastal Carolinas for the national holiday, the region's biggest tourist weekend.
Authorities issued a mandatory evacuation order for Hatteras Island and a voluntary evacuation order for Ocracoke Island, both in North Carolina's Outer Banks, CNN reported.
But it was not just North Carolina -- where tornado warnings were activated in some areas -- that was bracing for Arthur's impact.
The storm, which strengthened into a hurricane early Thursday, threatened to scuttle traditional Independence Day weekend picnics, parades and fireworks displays for millions of Americans along the East Coast, as far north as New England, although it was forecast to weaken as it moved northward over the long weekend.
Dangerous storm swells were expected as far south as central Florida, weather officials said.
The Atlantic hurricane season began June 1 and runs through November 30.
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