When you connect the output of the amplifier to one of the inputs it is called a feedback. Connecting the output to the negative input (through a resistor) is a negative feedback. Negative feedback makes the amplifier "track" the reference signal which is good for amplifying signals. Positive feedback makes the amplifier unstable and is good for comparator hysteresis and oscillators.
You have connected the output of the LM386 to the Rfb of the DAC. This creates a feedback loop through the internal DAC resistor to the Iout1.. and because you have connected the Iout1 to the positive input of the LM386, the feedback is positive.. this is not a good thing.