Fierce winds and flooding were expected along hundreds of miles of Atlantic coast and heavy snows were forecast farther inland at higher elevations when the center of the storm moves ashore Monday evening near Atlantic, New Jersey.
U.S. stock markets were closed for the first time since the attacks of Sept. 11, 2001, and will remain shut on Tuesday. The government in Washington was closed and school was cancelled up and down the East Coast.
Nearly 700,000 customers were without power by midday and millions more could lose electricity. One disaster forecasting company predicted economic losses could ultimately reach $20 billion, only half of it insured.
Forecasters said Sandy could be the largest storm to hit the mainland in U.S. history.
Off North Carolina, the U.S. Coast Guard rescued 14 of the 16 crew members who abandoned the replica tall ship HMS Bounty, using helicopters to lift them from life rafts. The Coast Guard continued to search for two missing crew members.
In New York, a crane atop a building on 57th Street in Manhattan had partially collapsed, leaving it dangling high above the street. Police said they were closing the area to pedestrians.
The storm interrupted the presidential campaign with eight days to go before the election.
Obama canceled a campaign event in Florida on Monday so he could return to Washington and monitor the government response to the storm. Republican presidential candidate Mitt Romney canceled stops Monday night and Tuesday.
Sandy picked up speed as it raced northwest toward the U.S. coast at 28 miles per hour (45 km per hour) on Monday afternoon, with top sustained winds at 90 mph (150 kph), the U.S. National Hurricane Center said.
At 2 p.m. (1800 GMT) the center of the storm was about 110 miles (180 km) southeast of Atlantic City, New Jersey, or 175 miles (280 km) south-southeast of New York City. Hurricane-force winds were already being recorded on the New Jersey coast.