Matlab can read data from text files just fine. It's true that in Matlab strings are stored as character arrays, but that would have no bearing on being able to read them. The first response assumed the OP is generating an ASCII file. That's not immediately apparent. So, the question becomes, how are you generating the file, and can you post an example?
Also, there's no need to use the Matlab node to read the file in Matlab unless you are trying to do this as part of your program. In that case, the logical question would be what is it that you're doing in Matlab, and can you do it in LabVIEW instead?