Let us remember what has happened prior to the shocking and memorable ending of this story. Having tried to take the pearl to the city to gain a fair price, Kino and his family came into conflict with a group of men who had been sent to take the pearl from him. In the ensuing conflict, his son was shot and killed. Now, let us note the description that the novel gives us of Kino as he returns to the village with his wife and dead son:
The sun was behind them and their long shadows stalked ahead, and they seemed to carry two towers of darkness with them. Kino had a rifle across his arm and Juana carried her shawl like a sack over her shoulder. And in it was a small limp heavy bundle. The shawl was crusted with dried blood, and the bundle swayed a little as she walked.
Clearly, the shawl had been used to wrap her dead son in after he was shot, and so it would be "crusted with dried blood" because of the blood that would have seeped out after the baby was wrapped up in this shawl. The reference to the blood-soaked shawl thus reinforces the fact of the baby's death and the terrible price that Kino has paid for his obsession with the pearl.
the baby was shot in the head so of course, blood came out.