Why did the police shoot Dally?

The police thought Dally was going to shoot at them. Dally calls from a payphone, saying he's just robbed a grocery store and is running from the cops. As the gang rushes out of the house, Ponyboy feels as if he is about to faint. They arrive at the vacant lot just as Dally does, from the opposite direction. The police pull up in their cars and jump out. Dally pulls his gun out and raises it; the policemen fire at him, killing him.