Before you get too worried, you should know that every child learns how to read at a different pace. It may be that pressure to succeed is causing your son stress. Remember that the best way to help your child to read is to make the process fun and enjoyable. Is there a topic that he is interested in? A lot of young boys are interested in things like dinosaurs, space exploration, etc. Perhaps finding him some books that appeal to his interests will help him get more comfortable with reading.
As a former 1st grade teacher I agree with Rose, try not too worry. These things take time. I had students at the beginning of the year who I thought would never catch up and they showed great improvement! I would ask the teacher the type of assessment they are using. Sometimes schools use an assessment which looks at speed over accuracy. Other schools use an assessment tool designed to look at comprehension. Also, ask the teacher what you can do at home s/he may have great ideas.
As for what you can do now, read to him. Have him interact with the story with you. You should point out the characters and setting and ask him what is happening in the story. Have him make predictions as to what he thinks will happen. Take turns reading, after you read have him read what you read word for word. Another thing, act out the story. Pretend to be one of the characters and act out what they are doing. Also, ask your son to pretend to be the character while reading the story. What would he, your son, do, how is he, your son as the character, feeling?
Most of all just show him that reading is enjoyable, not a job. If you are worried about his phonics or not knowing certain words, look at a list of his vocabulary words his teacher has and create a story with him using these words. Go over this story with him. Maybe place the words around the house and say them daily. Finally, I forgot to tell you one other other thing to do. Ask him to tell you a story. Write it down or type it out. Then read the story he created to him. he can repeat it and point out the words he used.