Hurricane Earl was downgraded to a tropical storm late Friday as it moved up the coast of New England towards Nova Scotia and New Brunswick.

A weakened Earl passed by Cape Cod, Nantucket Island and Martha's Vineyard in Massachusetts late Friday night. It brought winds of 112 kilometres per hour to the New England coast after grazing North Carolina with more power.

The storm was downgraded to a Category 1 hurricane by late Friday morning and has been losing strength as it has continued north through colder waters.

In preparation for its arrival, residents were battening down the hatches along the coast from Massachusetts all the way to P.E.I.

Earlier on Friday, U.S. President Barack Obama declared a state of emergency in New England, so that the federal government would be able to more easily provide disaster relief if the storm were to cause widespread damage.

Hurricane warnings had been in effect for portions of Massachusetts, some of which are popular vacation destinations during Labour Day weekend.

Massachusetts Gov. Deval Patrick called for people living in low-lying areas to get away from their homes by Friday afternoon, though no official order was issued. But Patrick said the state was well-prepared for Earl and "we're asking everyone: don't panic."

When Earl hit the North Carolina coast early Friday, the storm brought high winds and waves, but less damage than was originally expected.

"The good news on Earl is it has been steadily weakening, maybe even a little quicker than forecast," said National Hurricane Center Director Bill Read Friday afternoon.

"We had a fair amount of beach erosion and overwash from the high waves along the outer banks of North Carolina, power outages from tree rims and whatnot," he said. "Elsewhere, we really haven't had much more than the big waves, beach erosion and rip currents."

North of the border, tropical storm warnings were in effect for all of Nova Scotia and P.E.I. Heavy rain warnings were also in effect for eastern New Bunswick, and wind warnings were in effect for southwest Labrador.

In the early going, Earl produced little storm surge and only some minor flooding in selected U.S. coastal counties, said Chris Collins, a meteorologist with the U.S. National Weather Service.

In the Outer Banks of North Carolina, more than 30,000 were ordered to leave the popular stretch of barrier islands, in advance of the storm that whipped through the area overnight. Those warnings have been lifted.

"It's kind of nerve-racking, but I've been through this before," said Herma De Gier, a 65-year-old resident of Avon, a small village on North Carolina's Hatteras Island.

De Gier said she would stay at a neighbour's house, but preferred to be in close proximity to her property in the event of any damage.

North Carolina Gov. Beverly Perdue said there was no serious damage from Earl.

Path to Canada

The storm was expected to move north-northeast overnight Friday, making landfall in Nova Scotia between Yarmouth and Digby Saturday morning before moving on to Prince Edward Island and then the Gulf of St. Lawrence.

By Sunday morning, Earl should move through Eastern Quebec and Labrador.

In spite of weather warnings, thousands of people gathered in Digby for an annual motorbike rally. Some say they intend to hold the event regardless of the expected wind and rain.

"That's what bikers always do, they head into the eye of the storm," said one man who was attending the rally.

But Chris Fogarty, a supervisor with the Canadian Hurricane Centre, said that while Earl's top winds have slowed the weather system could still pose a significant threat north of the border.

"The size of the area of wind is huge with this thing, and there's going to be a very broad area of high winds moving all across Nova Scotia and Prince Edward Island," he told CTV News Channel.

"The overall energy of this storm may actually not have changed that much over the last two days," he added. "Winds have expanded out to this huge area, and that's still going to cause a lot of wind and waves to move into the Maritimes tomorrow."

Earl's tropical characteristics will stay in place thanks to the presence of abnormally hot and humid air in the region, the centre said.

"Gusts of this speed could cause tree branches and limbs to break and some trees to come down," the centre said in an information statement. "That could result in downed utility lines and related power failures."

And Earl is already causing air travel problems throughout the East Coast.

Westjet has cancelled its Saturday flights out of Halifax, Moncton, N.B., and St. John, N.B. Porter Airlines has halted flights from Halifax on Saturday and said other flights may be delayed this weekend. Air Canada has not yet published details of flight cancellations or delays but said a number of airports could be affected.

With a report from CTV's Roger Smith and files from The Associated Press and The Canadian Press