The major reason for the failure of financial conditions to improve in this case is that one of the major shocks--the reassessment of the profitability of owning and producing high-tech equipment--was, at the same time, a shock to financial markets and to aggregate demand.
The financial shock was the revaluation of equity values as a result of this reassessment--the bursting of the equity bubble in the technology sector. In addition, the dollar appreciated rather than depreciated, for reasons no one seems to fully understand. So two of the key channels in the transmission of monetary policy behaved differently than expected.