Hi
I've been TA in KS1 for over ten years, and NO, we would not expect Yr1 to read at that level.
We send home a 'scheme' book, (no longer ORT as the older ORT do not conform to phonics requirements, though newer series does.)
But the child also chooses a library book which may be story or non-fiction, and it is for child and parent to SHARE, talk about, look at pictures etc.
Or you could read it together, DD doing any words she knows -- the, was, to, and, big, (maybe also) first, very, reach, then. And, ironically, Satellite can also be sounded out, bit by bit, if she knows 'split digraph' - what we used to call 'magic e'!
But try not to fret about it: Yr 1 she's hardly started school! Just enjoy sharing any printed matter with her, read to her lots, and (if possible) let her see YOU reading for pleasure.
Of course, if more too-difficult books come home just ask the teacher about it. (Is DD particularly interested in Space? We have a Yr 1 Polish boy crazy about volcanoes, and now he's onto the Solar System !)
cheers