@hawkeye10,
I see no evidence that the law does NOT support an arrest here.
And that's pertinent.
Lacking such evidence, arrest him, process the scene as a crime scene, have a trial. Get to the bottom of it.
Meanwhile, I think the police were too quick to say something like "ooh, black kid with a hoodie walking in your neighborhood, yeah he was probably up to no good I believe your story," not that they have a soft spot for Hispanics.